Investment in the World of Fine Art

14 February 2019

The art world may be a misery to most people but for some this is a pastime to relax and enjoy the creative aspects of some work of art such as a painting, screen print or sculptures. Whether you enjoy art for it’s aseptic, its creativity or purely as your own personal collection it will give the owner great satisfaction of ownership.  However, there is no dispute that some people or even organisations consider art works as a pure investment for capital growth potential.


According to Maddox Gallery, art investors can experience compounded average returns of 11% per year (between 1966 to 2016) on some art works. Such growth figures can and have attracted private investors, even pension organisation and companies investing for a return on their cash.


Maddox have categorised artists in three categories:

The Blue Chip … these artists are established and some are household names such as Andy Warhol and Banksy. However such artist works command higher prices and some of their works sell for millions of Yen or Pounds. Blue-Chip Artists are generally household names and extremely well known in the art work. Their works will generally be found hanging in National art galleries and international collections.


Emerging Artists are at their early stages of their professional career, who are just being recognised on the primary art market were there work are sold.


Established Artists are more widely known in the art work and have established themselves in the art market, with many of their works being sold at established art auctions.


Depending on the artist classification, their works will commend different prices and hence this will provide the attraction of solid capital growth. However there is the risk element in terms of investment in their works, as sales prices may not increase in line with market expectations. Sometime this may be due to different factors such as the number prints (if it is a limited edition Screen print) or even trends and fashion.


Not only do individuals, private collectors and companies invest in fine art but large pension funds invest in fine works of art. For example, the British Rail Fun; which decided to invest $70 (about £40 million) million into fine art and collections between 1974 and 1981, in an attempt to diversify its portfolio and hedge fund against inflation. The British Rail Fund made an annual return of around 10%.


Gone are the days when investors simply looked to bonds, property, cash and shares for their portfolio. Hedge funds, private equity and so-called exotic investments such as fine wines and art are now beginning to play a role as well. "There is growing recognition of what art can offer to people," says Randall Willette of Fine Art Wealth Management, a company that advises private banks and wealth managers. "A number of financial services companies are looking at launching art funds or art clubs."


If you are thinking of investing in fine art, it is important to note that it is not general cheap in terms of other similar investments, and your time horizon should be at least a decade. However property main cost just as much as a fine blue chip painting. You also need to know what you are buying and that is why it is best to be guided by experts such as art galleries such as Maddox in London.


It is not uncommon for experts to use market monitoring data for the art world. The best known indicator of performance is the Mei Moses Index, which tracks art sold at auction. There are companies offering art market indices that track the "performance" of artists and genres of art over time, such as a Picasso index or an Old Masters index, but Maizels is not convinced that these indices offer a true reflection of art performance.

For more information speak to Enviro Estates as we can provide some directions.

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