Shopping malls, infrastructure, timber: these have all been posited as lucrative investment opportunities in recent years. But while the idea of investing in art is as old as the hills, art works have as yet played hardly any role in the managed fund industry. New research from an assistant professor of finance at Maastricht University released last week suggests that could – and perhaps should – be about to change. The research, produced by Dr. R. A. J. Campbell of the Faculty of Economics and Business Administration at Maastricht University, was commissioned by the New York and London-based boutique Castlestone Management, which recently launched the world’s first retail art investment funds. The research concluded that art should have a place in “any significant investment portfolio especially now that the benefits of art are readily available in regulated art investments funds”.

Dr Campbell's research showed that real assets, including art, had outperformed financial assets in certain decades, especially during periods of inflation. Furthermore, over the very long-term art produced superior annual returns to equities – 7.7% per year between 1875 and 2000 for art compared with 6.6% for equities.

And, while even the most far-sighted investor is unlikely to have a 125 year time horizon, the present period of economic uncertainty could very well be the right to look at real assets like art, Dr Campbell posits.

“Investors are looking for alternative asset classes which are likely to hold their value during these times,” she says. “There is a case to be made for holding real assets rather than purely financial assets with a depreciating real currency.”

Art investment also means that this asset class is no longer confined to the very wealthy, believes Dr Campbell. “With the emergence of new funds, which offer share classes that are more accessible to the smaller investor, we may see a more general move towards more widespread investment in art funds,” she says.

What we’re talking about here, then, is “a diversified art portfolio which invests in art purely for financial gain”. It’s interesting concept as a portfolio diversifier, but one that perhaps takes away the primary ‘compensation’ of investing in art – that you at least still have a picture/sculpture/whatever that you like even if you investment goes down the toilet in financial terms.

It’s also interesting to speculate what effect the proliferation of art funds would have on the art market – but that perhaps is a discussion for another day...

Fiona Rintoul, editorial director
©2009 funds europe

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