Securitising art

January 18 2016

Image of Securitising art

Picture: Art Newspaper

Art investment funds have been around for a while now, but they struggle to make reliably good returns for investors. A new fund called Arthena has now entered the game (reports The Art Newspaper), with the USP that it's for 'smaller' investors, who can put in as little as $2,500. Here's the business plan, as set out by founder Madelaine D'Angelo (above):

Arthena’s advisers began buying art last autumn with around $500,000 in funds that have been generated so far. The works fit into one of several investment categories, or “collections”, such as emerging art from New York and “undervalued” post-war art. D’Angelo says that each collection will be worth between $250,000 and $1m once all of the funds have been raised and the works bought. Arthena plans to hold the art for around five or seven years before beginning to sell it.

Sounds easy, doesn't it? But before you cash in your pension, think of this: art is illiquid, and has high transaction costs. Buy at auction, especially at the 'lower end' of the market, and you're instantly stung for the highest rates of buyer's premium - usually at least 25% (excluding taxes). Buy from an artist's dealer and you're likely looking at an even higher margin. Then to sell it again you're invariably losing another slice in commissions and taxes - sometimes up to 20% or more. So in that intervening five or seven years, you need to be pretty sure that the artists you're taking a punt on will grow by at least that much, just to get your money back. And don't forget the fund's own fees. 

If you've got $2,500 you want to 'invest' in art, my advice is to buy something yourself - and something you like. At least then you get the pleasure of actually looking at it. 

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