The Art of Investing in Art

(Thanks AJ). According to this article, yearly art sales are now reaching an estimated $10 billion in the United States alone, and "While money invested in the stock market's S&P 500 Index -- a conservative bet on Wall Street's top 500 companies -- has earned an annualized 11 percent return over the past decade, that same money sunk into the contemporary art market would have produced a whopping 29 percent return."

That's impressive, but I want to know where the figures to determine these claims come from? Secondary art market sales? Examining the IRS returns of all art galleries in the US? Reviewing all the appraisals of artwork done over the past decade?

And I got my answers to those questions; not from the article but from doing a bit of digging on the web.

This all comes from a team of Wall Street analysts behind Fernwood Art Investments, a new firm with offices in Boston, New York, and Miami (I can understand New York and Miami, but Boston?).

According to their website Fernwood Art Investments is a

"...research and investment company focused on the art economy. We are the first independent firm to develop a comprehensive suite of art-focused investment research, advice, financial products and services for sophisticated investors and collectors. Our work generates new ways to participate in the art market and, in the process, brings significant new capital to the art economy.

In short, Fernwood is employing rigorous portfolio management techniques traditionally applied to equities, bonds and commodities, in combination with academic and art trade expertise, to derive investable art insight. We invite you to explore our vision of art investing."

Anyway, their website has some pretty impressive, if Wall Streetish sounding documentation and references and studies and words that show me that these guys seem to know what they are talking about.

And yet "investing" in art is such a fungible science (at best). I mean, basic investment means buy low sell high. Or to be safe, buy a steady, safe investment and keep it for a loooooong time and then sell it.

In art, to me that means something akin to buying a Cindy Sherman set of photos 20 years ago (and sell them now!), or a Jack Vettriano painting in 1989 (when I was offered one for 300 pounds) and selling them now for a couple of million... you get my point? The buy "low" is done at the early point in an artist's career, when more often than not, he or she is under the "radar" of most people that I imagine as "investing in art."

And the "safe art guys" are the masters, and they are already pricey, so only investors with bucks could buy a Picasso, or Van Gogh, or Renoir, etc. Buy one one, keep it for 20-30 years and it is certain to increase in price (less the 10% auction house commission).

And this is where it gets intriguing.... because, maybe... and just maybe... if a firm like Fernwood could gather a dozen rich investors, and acquire a Picasso oil with their funds, and then hold it for them, and when the time was right, sell it at a good profit... then this could work!

But the hard work for Fernwood will be to identify the up and coming emerging artists about to make it big, and buying their artwork early on, and holding onto it while it increases in price. That's a formidable task.

My tip to them? If anyone from Fernwood is reading this: Buy Tim Tate.