Art As an Asset

Art as an Asset Art and the Collector European Fine Art Foundation Wealth Strategies Group (TEFAF) categorizes art as Sarah D. McDaniel, CFA This discussion intends to heighten follows: 1. Classical Antiquities Eliana Greenberg awareness of the significant role art and Ancient Art, 2. Antiquities, 3. Liz Gully may play in the context of a Old Masters, 19th Century and collector’s overall wealth. Impressionists Works, 4. Modern The Blue Rider Group at Generally, a collector may segment Art, 5. Post-War and Morgan Stanley wealth between financial assets Contemporary Art, 6. Prints, Maryanna McConnell including stocks, bonds and real Precious Books and Maps, 7. La Lauren Sparrow estate from other possessions such Haute Joaillerie and 8. Design Dan Desmond as art. This separation is Objects 1. For the purposes of this sometimes the result of art being discussion, art is meant to considered a personal interest encompass as broad a rather than an asset. Additionally, categorization as possible and the historical opacity and may include the following which is inaccessibility of the art market by no means a complete list or may also be contributing factors. representation: paintings, However, these factors have and sculpture, jewelry, cars, furniture, are being alleviated. It is because wine and collectibles. of this increased transparency that a collector should carefully The Art Market consider the role of art on a balance sheet in addition to the The art market has evolved from salient implications of owning art. patrons commissioning works of art based on the artist’s talent and The definition of art varies reputation in the 17th century to depending on who answers the the emergence of auction houses question. For example, The in the 18th century and galleries in 1 the 19th century. Later art fairs Auctions are open to the public so Dealers typically work in either the developed in the 20th century technically every work of art or lot is primary market (selling directly from followed by online providers available to the largest group of the studios of working artists or surfacing in the 21st century. potential buyers. Buying at auction directly from the estates of can be a more “democratic” deceased artists) or in the Auction Houses method of acquiring art as secondary market (reselling work auctioneers accept the highest bid that has already been in the market While there are thousands of via the age-old process of real-time at least one time). Dealers in the auction houses globally, arguably bidding. Auction houses take a secondary market tend to buy and the two oldest and largest are buyer’s premium and charge a sell higher priced work. Christie’s and Sotheby’s. sellers commission on the sold or hammer price. Auction houses Dealers and Gallerists play a Christie’s, founded in 1766 by efficiently gather thousands of significant role beyond the James Christie, has since items annually across a broad brokering of artwork. They nurture conducted the greatest and spectrum of genres, periods and new talent, educate the public and most celebrated auctions media. Catalogs with descriptions provide advice on maintenance, through the centuries providing of the art are produced and experts installation and display. a popular showcase for the offer bidders guidance about the unique and the beautiful. Art Fairs items on offer. Christie’s offers around 350 auctions annually in over 80 Works sold at auction, however, Among the many closely watched categories, including all areas are exposed. Should they not sell international fairs is Frieze Art Fair of fine and decorative arts, or sell at a low price, the public (London), TEFAF (Maastricht), Art jewelry, photographs, sales record for that artist and Dubai and Art Basel. Using Art collectibles, wine, and more. object are forever altered. Basel as an example, consider the Christie’s has a global Additionally, many auction houses following: presence in 46 countries, with now conduct an increasingly large Art Basel started in 1970 by 12 salerooms around the world share of their business as private Basel gallerists Ernst Beyeler, including in London, New York, sales. In other words, collectors Trudi Bruckner and Balz Hilt. In Paris, Geneva, Milan, can buy or sell privately through its inaugural year, the Basel Amsterdam, Dubai, Zürich, traditional auction houses as well show attracted more than Hong Kong, Shanghai, and as through Gallerists and Dealers. Mumbai 2. 16,000 visitors who viewed Dealers and Gallerists work presented by 90 galleries Sotheby’s, founded in 1744 by representing 10 countries. Samuel Baker, is a British Dealers and Gallerists are perhaps Thirty art publishers also multinational corporation closest to the artist. They arrange participated. headquartered in New York shows, sometimes absorb a portion By 1975, five years after its City. One of the world’s largest of production costs and founding, the Basel show brokers of fine and decorative occasionally serve as liaison to reached almost 300 exhibitors. art, jewelry, real estate and museums and curators. Through The participating galleries collectibles, Sotheby’s their “brick & mortar” spaces, this came from 21 countries, operation is divided into three part of the market is a critical link attracting 37,000 visitors. segments: auction, finance, between artists and collectors. and dealer. The company’s Dealers typically share profits with In 2013, Art Basel launched its services range from corporate the selling artist or consigner and inaugural show in Hong Kong. art services to private sales 3. prices are sometimes negotiable to Half of the participating the buyer. 2 galleries came from Asia and Despite the majority of the art however in that the shares reflect the Asia-Pacific region. market remaining unregulated and the profitability of the business private, there has been increased which is partially attributable to the In 2014, Art Basel partnered transparency with regard to art market and valuations realized with Kickstarter to create a medium, price and volume. While but also attributable to the efficacy crowdfunding initiative aimed at auction houses provide price of the management of the funding non-profit visual arts discovery through publicly available company. Additionally, because organizations worldwide. information about their sales, Art these securities trade on Together with JRP Ringier, Art Fairs assemble large numbers of exchanges, they are also exposed Basel publishes Art Basel | dealers so potential buyers may to exogenous shocks to equity Year 44 the first book that better understand the landscape of markets that are unrelated to the 4 covered all three shows . sellers and the available inventory art market. of art. Additionally, with advances Art Fairs are tremendous social in technology and user adoption, Art securities with indirect access to events and a great way to gather more sales information is being the art market include: information about many facets of captured and recorded for a the art market. Art Fairs are a major Sotheby’s: listed on the New broader audience. focus for dealers many of whom York Stock Exchange and is expect to meet new clients and a Accessing Art one of the aforementioned majority of whom expect fairs to auction houses 5 . continue to drive increased sales. As the art market evolves, so too Artnet: listed on the Frankfurt do the methods of gaining art Stock Exchange and is an art Online exposure. To date, the market website that provides predominant means of accessing Collectors are increasingly relying images of works of art with art is from direct purchases. on online platforms and digital their realized market prices. However, there are increasingly images to make purchasing “Artnet operates an new ways of indirectly gaining decisions. There are a number of international research and exposure to the value of art via platforms dedicated to this type trading platform for the art other types of transactions. Direct collecting – Artsy & Artspace market …It provides services purchases of art may be among them – and traditional that promote accessibility accomplished through the auction houses have begun to use allowing users to research art, previously described auction online sales for lower value works. contact galleries directly and to houses, dealers, art fairs and Reduced overhead allows these attain price transparency.”6 online purveyors. Indirect methods providers to charge a lower of accessing art may be commission to buy and sell. Online Artprice: listed on the NYSE accomplished via art securities, sales are a democratizing force in Euronext Exchange “claims to financing and funds. the space of art collecting. be the world’s leading online Additionally, there are numerous Art Securities art price database with more websites and providers that offer than 27 million entries increasing pricing transparency People may gain indirect access to commented by its art historians some of which include: the art market by purchasing art covering as much as 500,000 securities. Examples of such artists. Artprice Images allows Artnet.com Artforum.com securities are equity shares in the access to … 108 million Askart.com Theartnewspaper.com below listed companies. By images constantly updated Artfact.com Flashartonline.com 7 purchasing shares, one gains from various auction houses.” Artprice.com Frieze.com Artandauction.com Gabrius.com exposure to art indirectly by Artbase.com Kunstmarkt.com becoming a fractional owner of the business. The exposure is not pure 3 Art Financing museum but also to the business of changing fortunes of the UK maintaining art for public enjoyment economy and protection against Indirect access to the art market and the sentiment of the public currency realignments. may also be accomplished through toward art. art financing. By providing the The British Rail Pension Fund funding for an art transaction, one Art Funds invested 40 million (of its 1 billion) receives interest and future pounds at the time into repayment of principal backed by For decades, there have been approximately 2400 works of art.

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