Art, a field that is traditionally known for sculptures and paintings, has now turned into an asset for a new purpose: investment. Collectors purchase artwork so they can appreciate it whenever and wherever they want, however, an emerging trend has seen investors allocating capital into fine arts to increase their monetary value and guarantee financial returns. This has recently led to a number of unforeseeable partnerships, such as that of Bulge Bracket bank UBS and tech startup Artsy.  Their collaboration launched a series of short film’s that focuses on the 4 major aspects of the contemporary art hub: auctions, galleries, patrons, and art fairs.

While art investments have economically strengthened the communities of both emerging and established artists, it is apparent commercialisation is beginning to overlap with this creative domain. The result being this newly established asset class is starting to reduce artworks into numbers.

Musée de l’Orangerie | Photo by Time

According to Sophia Wan, Asia reporter for CNNMoney, wealthy investors created the art investment fund to differentiate from financial assets such as stocks and bonds, and transform art into an unusual money-making catalyst. The rise in art investment has created new records for international art sales, with $66 billion closing last year. Jon Reade, co-founder of Hong Kong-based art brokerage Art Futures Group, also commented on the popularity of art investment:

“People are looking at new areas to invest in, and at the moment art is one of those — it’s making people money.”

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Sotheby’s Auction House | Photo by The Wall Street Journal

In art investment, fund managers estimate when certain artworks will peak in value with various indicators coming from auction houses, curators’ and galleries’. Several art funds narrow the scale of investment by focusing on art from a certain region, movement, or alternative mediums such as photography.

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Dollar Sign Series by Andy Warhol | Photo by WideWalls

As a recently developed asset class that generates profit for investors, it has been argued that art investment is contributing to the excessive commercialisation of fine arts. Art critics like Brian Sewell strongly discourages anyone to invest in art:

“No one should buy works of art for investment – art is for pleasure and enlightenment.”

Although investment will aid the growth of the art world as financials strive to educate themselves about this creative domain. It’s apparent art will become associated with monetary value as opposed to the genuine appreciation of skill.

Art Basel Hong Kong

Art Basel Hong Kong 2014 | Photo by Phil Akashi

As the rise of art investment is becoming increasingly fashionable, there are a number of pros and cons for investors and artists to consider. By recognising ‘art’ as an asset class, it provides every art personnel with further opportunities to display their talents. Although art funds are relatively new, there is a growing recognition by investors that offers diversification possibilities for portfolio management. Generating both financial and aesthetic returns to a great extent, artists are now en route to achieving enhanced public disclosure whilst to sustaining a living.

Written by Christy Chin

Edited by Christina Wright

References

Artsy x UBS (2015) The Art Market (in Four Parts) [Online] Available at https://www.ubs.com/microsites/ubs-artstudio/translating/the-art-market.html [Accessed on 22/07/2016]

Sophia Wan (2014) Wealthy investors flock to fine art funds [Online] Available at http://money.cnn.com/2014/04/17/investing/art-investing/ [Accessed on 22/07/2016]

Sophie Christie (2015) Brian Sewell: ‘My biggest fear is mansion tax’ [Online] Available at http://www.telegraph.co.uk/finance/personalfinance/fameandfortune/11485082/Brian-Sewell-My-biggest-fear-is-mansion-tax.html [Accessed on 22/07/2016]

Asja Nastasijevic (2016) Putting Art Investment Funds to the Test [Online] Available at http://www.widewalls.ch/pros-cons-art-investment-funds/ [Accessed on 22/07/2016]

Adriano Picinati di Torcello (2010) Why should art be considered as an asset class? [Online] Available at http://www2.deloitte.com/content/dam/Deloitte/lu/Documents/financial-services/artandfinance/lu-art-asset-class-122012.pdf [Accessed on 22/07/2016]