For Love or Money? The Merits of Investing in Art

Andrew Bailey at The Easel:

Looking at this market through the eyes of an investor, what can art offer? Like, say, real estate, it boasts strong capital gains over the longer term. Of the 600% growth in turnover since 1990, price escalation has been a major contributor, albeit skewed toward higher priced works. Advocates say that returns on art investments are uncorrelated with the returns from other asset classes, making it attractive for inclusion in a diversified portfolio. Art is both durable and highly mobile. Various airports in Europe and elsewhere host tax free storage zones where valuable artworks can be held. If a painting quietly changes hands and moves from one storage suite to another, who is to know? Individuals unhappy with their tax bills or nervous about their spouse’s divorce lawyers have been known to exploit these characteristics to great effect. And, of course, art emphatically offers aesthetic returns – it looks great on the living room walls while you await the capital gains.

But art has an Achilles heel – it is difficult to buy and sell. Identifying reputable current artists, knowing what a “fair” price is and who might pay it, understanding a work’s provenance, the risk of forgery, the list goes on and on.

more here.