Art is an investment you can appreciate - whether it appreciates in value or not. Though some people collect art solely for investment purposes, most experts agree that the best way to invest is to buy something you love. That way, whether it appreciates in value or not is immaterial; the pleasure of its company will be enough.
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In the 1989 edition of The Business of Art, art maven Jeffrey Deitch recalls his start in the art business and the prevailing views towards art at the time. Compared to today, the contemporary art world seemed cloistered, with relatively few buyers. In the mid-1970s very few people thought of art as an investment. It would not be long, however, before demographic and economic trends joined to change the art world. Deitch pointed to the coming of age of the well-educated baby boom generation and America`s increasing appetite for the finer things as catalysts. However, it was the inflation panic of the late 1970s-early 1980s that was the real economic fuel behind the new vitality of the art market. This newly prosperous, aesthetically oriented generation, and their parents as well, saw their cash eroding in value and rushed to put their money into tangible assets such as art.
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Meanwhile, overseas, The British Rail Pension Fund was setting the precedent for institutional art investing. During the 1970s it invested 2.9 % of its portfolio (about 40 million British pounds) into multiple categories of art. The fund sold most of its art portfolio in the late 1980s, and achieved a return on its investment of 11.3% compounded to December 1999. This success paved the way for such recent entrants as Philip Hoffman`s Fine Art Fund, a limited partnership designed to acquire an art portfolio that will be sold at a later date. The partnership successfully raised its target of $70 million towards that purpose last year. 70 percent of the partnership`s funds came from private investors.
Investment in the art market requires a knowledge of the markets for individual artists, but also of the associated investment risk. As with the stock markets, this is not insignificant however, the art market is considerably less volatile.
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