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Highlights
- Art investment is usually reserved for the very wealthy. However, art funds make investments in this asset more accessible to the average investor.
- Art funds are investment funds that purchase and manage works of art with the intention of generating returns.
- In an art fund, an experienced fund manager would acquire a piece of art on behalf of the investor. Once purchased, the firm would store and maintain the artwork and resell it to make a profit.
In the past, investing in art has been an endeavour traditionally available to the more affluent echelons of society.
Art is a great way to diversify one’s portfolio, and as a tangible asset, it isn’t associated and isn’t influenced by the stock market.
When one thinks of art auctions, one thinks of a collection of megarich individuals bidding on art pieces whose price is sometimes in millions and sometimes hundreds of millions of dollars.
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Art investors can sometimes acquire extremely lucrative dividends depending on the art piece. However, this endeavour has traditionally been the pursuit of an exclusive rich subculture.
But now with the option of owning art funds, this market is opening up to a whole new demographic who might otherwise have not have been able to invest in this lucrative asset class.
What is an Art Fund?
Art funds are investment funds that purchase and manage works of art with the intention of generating returns. Existing in this space are firms that manage professional art. These management firms receive a fee as well as a slice of the returns delivered by the fund.
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Art funds offer a way for people to invest in the artwork without owning the entire piece. The benefit of this is that these funds reduce the risks and outright costs one would be required to pay if one were to invest in the individual art pieces while also providing the benefits of diversification and stability.
The Benefits
Art funds allow investors to own the art piece partially whilst still reaping the benefits of the asset without undertaking the risk and outright costs involved.
That responsibility is carried by a fund manager whose job is to acquire the art for their investors. The firm then stores and maintains the art and makes a profit reselling it.
Should you invest in art?
As mentioned, art investment is usually reserved for the very wealthy. However, art funds invest in this asset more accessible to the average investor.
Investors are often encouraged to diversify their portfolios. The opportunity to enter the world of art investment through art funds is a great way to invest in a relatively stable asset class.
So, while high upfront costs and low liquidity are most certainly associated with the traditional art investment world, art funds can provide a way to mitigate some of those concerns, which would otherwise deter potential investors.
So next time you see an original Picasso, Warhol, or Basquiat, just know you could potentially become a part-owner of a work of artistic genius.
