[an error occurred while processing this directive]

Art Investment Introduction

INTRODUCTION

 

DISCLAIMER:

Although we make every effort to insure that, all the articles and references used in this area originate for long-standing and reputable professional from around the world, who do not nor should not be held responsible for the accuracy of the information contained within their articles, links or references.

This area is dedicated to those of you who either are already Investing in Art or those who would like to. We hope that you find our articles interesting & informative. if you have any questions about any of our articles or indeed would like further information about Art Investment, then, email our Investment Team on info@artworkxofmann.com.

ArtMarketInsight ArtMarketInsight

Art Stage Singapore: a new art fair is born

 

Asia now has another art fair: Art Stage Singapore will be open from 12 to 16 January 2011. The Director and principal driver of this project is Lorenzo Rudolf, former Director of Art Basel (1991-2000), co-creator of the Shanghai art fair (ShContemporary) and founder of Art Basel Miami Beach. Rudolf clearly intends to turn Singapore into a major platform for the emerging art scenes in Asia ... Read more >>>

ART MARKET CONFIDENCE INDEX® by Artprice

      AMCI: 2010 finishes with a +30 point confidence AMCI, the annual average. The confidence on the art market increased by 51% in 2010 vs in 2009. If the prospective artworks acquisition are somewhat curbed by the rise in art prices, the health of the economic art market is still a very strong stimulus for the voters on the short and middle term. View the AMCI >>>               

ARE YOU LOOKING TO START YOUR OWN ART INVESTMENT COLLECTION - Here are some beginners tips...

When buying Art, first ask yourself this...What does art mean to you?

Does this only mean a stylish haircut done by your stylist? Or does art mean something more than that? Maybe you have some pieces of art on your walls, but does that mean you are a lover of art and understand all about it? When buying a piece of art you should consider whether or not you have a taste for it and should know which artwork will enhance the look of your apartment.

However, believe it not, art is more than a means of decorating. It can be a form of investment as well. In fact, there are investors who rank art just after property as far as investing money is concerned. Now, a question that can arise in your mind is how can one really locate a true piece of art that is highly valuable?

Some tips are mentioned below that will help you make art a part of your investment portfolio. In this regard, you should ask yourself the following questions:

Do you really like art?

This is a basic and simple question you should ask yourself. It has been observed that sometimes the novices enter this art market even if they do not have any passion for this form of investment. This in turn makes them select pieces they do not like and thus lose money.

How much do you know about art?

If you have done a course about the origin of art from any college, then it’s fine. However, you should not be of the opinion that all you know is enough and need not know anything more about art. The world of art resembles any other type of market. It exists on factors that occur at the present juncture and it looks out for what is going to happen in the future.

If you want to find out whether you really love art or not, visit art museums and galleries. You can learn about the art field through the museums. On the other hand, you can also learn about the world of art from the galleries.

You should consider the shows and galleries as a marketplace of art. Attending these places or finding out what is going on in the world market of art is a wise decision. The added advantage is you can solve many of your doubts regarding art from these galleries. However, always remember these are salespeople.

Are you a novice buyer?

As far as art or any other investment is concerned, you should know exactly what you are doing. When you see some successful people, you may think, ‘Why can’t I be successful?’ Like property, art also has a business perspective but here the taste of the buyer is considered to be of primary importance. As far as an investment is concerned, it plays a crucial role. Just because a novice buyer cannot understand why and how a market fluctuates on the basis of taste does not mean he will lose anything. 

Where do you start?

If you are thinking about putting together an art investment portfolio, here are some ideas to keep in mind: 

Develop your goals for the portfolio. What is it you want to gain by creating the art portfolio? 

Evaluate your level of comfort when it comes to risk. Some people are by nature risk takers while others tend to be more conservative. There are art investment options that will complement both extremes as well as any mix in between.

Learn about the many types of art investments. You may consider such items as art funds, investing in shares of art auction houses or art investment vehicles, buy a portfolio of artworks, or start with a single art piece and grow your art portfolio over time. 

Set limits on how much you can invest in art and your overall investment portfolio. Investing should be done with net income that is not earmarked for food, clothing, rent or mortgage, travel and other common budget items. Check your payslip for any deductions (except tax) already made, for example superannuation, health insurance, company car. For the most accurate picture, add these amounts back on to your income and then include them in your expenses. Leave out any irregular income that you would not usually receive, for example overtime that is not regular or bonuses for unusually good performance. Look at what you have left over after taking care of your other financial commitments and only use that for your investing activity. 

Ensure purchasing top quality paintings, i.e. a painting by a Bona Fida , emerging or renowned artist. However, don't cross your budget for this purpose. Try to look for good paintings that are within your budget.

Get professional advice. Especially for newcomers, you need the counsel of someone with experience in the financial world. Hire an art adviser

Diversify your art investments. You may want to go with a couple of mid-career artists, toss in a speculative emerging talent or two, and perhaps put your money into blue-chip artworks.

By diversifying your art holdings, you help to create a situation where one investment may help to offset a temporary loss you may experience with another investment.

 

Why Use a Private Art Dealer?

Some of the world's largest wealth management companies are starting to realize the importance of art as an investment. However, brokers who specialize in fine art investments are trained in art and not in investments or financial planning. They are great resources to help determine how much of your portfolio should include art, but not when choosing the individual art pieces. Find a private art dealer who is very knowledgeable about their art and investments overall, who has financial planning experience and can educate you about various asset classes.  A good private art dealer is one who will explain to you everything they know about the artwork, art market, economic and investment environments, tax treatment and provide you with a sound evaluation where an artwork may or may not fit into your investment portfolio. 

 

 

 

--------------------------------------------------

 

What are the Risks?

Any investment involves varying degrees of risk. Firstly, there are general investment risks, which are common to all investments. These include general factors such as inflation, movements in interest rates, government policies and legislation, taxation and changes in consumer confidence.

 

Next, there are art specific risks. These are risks with particular relevance to the art market, like:

Market risk

This is the risk that the art market will move in an unfavourable direction or begin to show signs of volatility, so that investors begin to lose confidence

Time-frame

Art is a medium to long-term investment – investing in art often means that your money is tied up for several years

Liquidity risk

Art investment is typically an illiquid investment, and paintings cannot be bought and sold instantly on impulse

Valuation risk

The value of a work of art is a matter of opinion, and this value may not be realised when the artwork is sold

Insurance risk

Insurance may not cover all events of loss & works of art may be damaged or destroyed

 

There is the risk of buying a fraudulent copy of a painting.

 

Another set of risks is added when you talk about an art investment fund or an art trust. These include: 

Lack of past performance – the investment fund may have no experience in investing in art

Risk in selecting assets – there is always the risk that the artworks depreciate in value.

Tax – there is always the risk that tax laws may change, and impact on the investor’s outcome in the future. As with any investment, investors should talk to their own tax adviser before making any decision.

Compliance risk – if an investment trust or a fund(e.g. Self-managed Superannuation) does something to jeopardise its financial services licence issued by a regulator, this could affect investments and the fund’s sustainability as a financial entity

Liquidity risk – because of the market, you may not be able to sell your art investment when you want to, or not at all. The secondary market for art is unregulated and is fragmented.

Lastly, there are economic, political and social risks. An economic downturn can affect investments, and may affect the ability of an art trust or an art fund to buy or sell art. It is hard to anticipate changes in government policy or predict social instability and these pose significant risks for investors.

 

---------------------------------------------------

Return on your investment

Art market sales are continuing to be higher than expected, even in today’s climate – with the fall out of the global financial crisis and the sub-prime GFC crisis. There’s a high demand for art because by its nature, artworks are unique and in limited supply. Adding to the mix, most of the world’s great works of art are in art galleries or private collections. Economically speaking, thiscreates a collection of “goods” that are not readily converted into cash, and unpredictable. 

In an era of volatile stock markets, low returns on real estate investments and the lowest interest rates on fixed deposits, investors are now considering other investment avenues. Among alternative and interesting investment options is art - which has been faster gaining popularity. Art, like shares, real estate or an alternative investment (commodities, hedge funds, currency, etc), is a mid to long-term investment.

Moses compared statistics on the behaviour of real returns for various asset classes and found that the volatility of art market price index dropped to 21.3% during the past 50 years from twice as high in the prior 100 years, making the art index just a bit more risky than the major stock market indices.  More and more people willing to put their money into art as an investment. They’re quickly realizing that it’s less risky than playing the current stock market.

Goetzmann found significantly out-performed both stocks and bonds during 1900-1986 sample periods. Dedman’s AMI (Australian Art Market index) returned over 12% per annum compounded over the twenty-year holding period, with selected indigenous artists further outperforming AMI up to 9 times.

 

--------------------------------------------------------

 

How to build an art investment portfolio

Putting together a viable investment art portfolio is something that more people should do. With the wide range of investment opportunities available today, there are all sorts of investments that will fit into just about any budget and satisfy any level of acceptable risk. 

Art as an Alternative Asset

The Merrill Lynch World Report found that twenty percent of High Net-Worth Individuals, globally, have allocated their investment of passion dollars to art collections. A lot of people were tempted to start collecting art a long time ago, but since art investments were not considered as lucrative or stable as shares or bonds, the art market was mainly controlled by a relatively small number of market participants who did it purely for passion, making the art market all the more difficult to access and become a part of.

The art market has developed greatly and continues to progress into a more innovative and highly developed source of alternative assets. Over the years, art has become accessible to all levels of investors; from those collecting art as individuals to those purchasing art through companies, trusts or even self managed super funds. But one aspect that distinguishes traditional art investors to modern art investors is the fact that new art investors look at economics and balance portfolios by considering a wider range of artists.

Diversification

Different types of investments perform better under different market conditions. By investing in more than one type of investment you diversify, which can help reduce the risk for your overall investment portfolio. The more ways you diversify the more likely you are to reduce your risk.

More than one investment, combining blue-chip artists with mid-career and speculative emerging art talents)

More than one type of art medium or art style when investing in art, just like you’d use more than one type of fund and investment manager when investing in managed funds.

Let's say you had all your money in just one investment and that investment didn't perform - you would make a loss. But, if you spread your money across different types of investments you may have a better chance of including some investments that will perform.

 

------------------------------------------------------------------------------------------------------------

Tax Deductions for Art Gifts - United Kingdom

The Acceptance in Lieu (AIL) Scheme for art enables taxpayers to transfer important works of art and other heritage objects into public ownership while paying Inheritance Tax, or one of its earlier forms. The taxpayer is given the full open market value of the item, which is then allocated to a public museum, archive or library.   The AIL scheme allows people to offer items of cultural and historical importance to the state in full or part payment of their inheritance tax, capital transfer tax or estate duty.  

The scheme offers clear tax benefits. Items are generally worth at least 17% more if offered in lieu of tax than if sold on the open market at the same price, because tax would have to be paid on the amount sold for. The MLA-AIL Panel advises clients and HM Revenue & Customs on which items are acceptable in lieu of exemption from Inheritance Tax or Capital Gains Tax. To qualify for acceptance in lieu of tax, items must be of national, scientific, historic, artistic, architectural or local significance, often works of art, where aboriginal art is likely to represent a number of those.

Offers in lieu are made to HM Revenue & Customs. They must be approved by the Secretary of State for Culture, Media and Sport (or the appropriate Minister in the devolved governments in Scotland or Wales) who is advised by MLA's Acceptance in Lieu Panel. This Panel consists of independent experts, who seek specialist advice on the object offered.  In the light of that advice, the Panel recommends whether or not the object in question is pre-eminent and assesses its open market value. The Panel's recommendations are made to the Secretary of State for Culture, Media and Sport (or the appropriate Minister outside England), who decides whether or not an item should be accepted.

After reading this general guidance we suggest you contact Capital Taxes Manager, MLA, Victoria House, Southampton Row, London, WC1B 4EA. Telephone: 020 7273 1456 Fax: 020 7273 1424. Anyone who is liable for the payment of an existing inheritance tax bill can offer an object in part or whole payment of the tax. This is known as 'art Acceptance in Lieu', hence the title of the scheme. All advice on pre-eminence, valuation, condition and allocation (except for the allocation of manuscripts) is managed by MLA.  If you have an object which you would like to put forward, please write to Capital Taxes Heritage Team, HM Revenue & Customs, Ferrers House, PO Box 38, Castle Meadow Road, Nottingham, NG2 1BB. It would be helpful, although not essential, to send a copy to the Capital Taxes Manager at MLA, Victoria House, Southampton Row, London WC1B 4EA, including: 

Ireland Limits  

  1. However, just in case you think that Ireland is a paragon of enlightened tax treatment for the heritage, it should be noted that the total value of the relief given in any one year is capped at €6,000,000 (£4,000,000).

You can obtain more information on AIL Panel members by visiting http://www.culture.gov.uk 
and by visiting http://www.mla.gov.uk

 

--------------------------------------------------


  

SKATE'S ART INVESTMENT HANDBOOK: ANNOUNCING THE UPDATED, EXPANDED EDITION

McGraw-Hill publishes Skate's Art Investment Handbook

 

Skate's Art Investment Handbook: The Comprehensive Guide to Investing in the Global Art and Art Services Market, by Sergey Skaterschikov, is released by McGraw-Hill in November 2009. (Hardcover, 304 pp., IBSN-13: 978-0-07-162572-2, $65)


"Skaterschikov has produced a comprehensive and well written overview of investment in high-end art. Every aspiring investor should read this book cover to cover - twice - before even thinking about writing their first check." -- Don Thompson, Author, The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art

"Whoever thought that Sergey Skaterschikov's initiative is only about long term value creation in the field of arts fall short! It is much more: it’s a commitment for building democratic virtues, because every piece of new art is a piece of new freedom." -- Boris Marte, Member of the Board of ERSTE Foundation

"Skate's Art Investment Handbook is a must-read for anyone who is passively or actively involved in the art world. It is a thorough, accurate and fascinating account of this market that will certainly enlighten the art market amateur, veteran, collector and investor alike." -- Philip Hoffman, CEO, The Fine Art Fund Group


Skate's Art Investment Handbook is an essential resource for investors interested in alternative investment assets. It is also a "must-have" for collectors and art-world professionals. Skaterschikov predicts this period of economic decline will create major opportunities benefiting artists, collectors and investors.

 

Among his forecasts:

In Skate's Art Investment Handbook, Skaterschikov provides a detailed, dispassionate look at the global art investment market. He then outlines an analytical model and rational strategies to profit from that alternative asset class, including techniques that allow investors to:

Skate's Art Investment Handbook provides an extensive data section including Skate's Masterpiece Peer Group: the Top 1,000 Works of Art by Market Value, the Top 50 Artists by Market Value and Skat