About – Company News
May 22, 2010
Is Art the Next Boom Investment?
By MARY PILON
On May 4, Pablo Picasso’s “Nude, Green Leaves, and Bust” sold for $106.5 million at Christie’s in New York, setting the world record for any work of art sold at an auction. Which has art-loving investors wondering: Is the art market exiting its recession?
If theft is any gauge of popularity, they can take heart: Five multimillion-dollar works, including pieces by Picasso and Henri Matisse, were found missing from Paris’s Musée d’Art Moderne early Thursday.
“It looks like the art market is starting to come back,” says Michael Moses, a retired professor at New York University’s Stern School of Business and co-creator of the widely followed Mei Moses All Art Index. The art world tends to trail the stock market by six to 18 months, he says, which suggests there could be more upside later this year.
But those hoping to swoop in on a nascent rally should be aware that even the most beautiful art can carry major blemishes as an investment. “Just like stocks, there are parts of the art market that will perform differently,” Prof. Moses says.
In fact, the term “art market” is a misnomer, says David Kusin, founder and president of Kusin & Co., a Dallas-based research firm focused on fine art, decorative art and antiquities. “It’s a series of micro-markets that aggregate the market,” he says.
For example, prices of post-war and old-master works increased by 19% and 17%, respectively, during the first quarter, according to various smaller Mei Moses indexes. But American works created before 1950 declined by more than 30% over the same period.
All told, art lost 5% of its worth in the first quarter of 2010, according to the All Art index, which tracks prices by analyzing some 15,000 repeat sales at auctions. The index plunged 35% during the same time last year. The index tracks only a sample of works that have proven themselves in the marketplace by being sold and resold, so it may not give a complete picture of the entire art market. It does not track the prices of works that have been bought but not resold or haven’t been put on the market at all.
Mr. Kusin cautions anyone with less than $20 million in cash to avoid investing heavily in art. “Art investment is a black hole,” he says. “From the moment you buy or sell, there are ongoing costs. As an owner, you have to be realistic.”
Instead, he says, you should “buy because you enjoy what you’re doing or are passionate. But don’t cloud the issue by claiming to invest.”
Among the costs of doing business: auction fees, or costs charged to a seller and buyer by an auction house. They vary widely, but can be 20% of the price or more. Such fees, typically printed at the front of an auction catalog, can sometimes be negotiated, and buyers and sellers can sometimes organize bulk discounts, but costs have generally risen over the past few years and show few signs of letting up. Steep specialized transportation, maintenance and insurance costs can also eat into projected returns.
Hedging Risk
Art can be used to reduce risk in larger portfolios, but it is typically not a liquid asset. Generally, works are often held onto for several decades or even generations, and a painting can rarely be unloaded as quickly or easily as shares of stock.
And then there are the tax considerations. Art is generally treated as a collectible, like jewelry or wine, making it subject to a 28% capital-gains tax when sold, as opposed to the current maximum 15% long-term capital-gains rate for investments like stocks, says Nadine Gordon Lee, a CPA and president of Prosper Advisors in New York. Art is also subject to sales taxes—if you buy a painting in London and live in New York, say, you are on the hook for sales tax bill when you come back home.
You will also need to reappraise any artwork when it becomes part of an estate or is given away, and owners must keep detailed documentation of a work’s history to prove estate tax has been paid on it in the past in order to resell it at an auction. “You can’t just take something off a family member’s wall,” Ms. Lee says.
Private Funds
Some investors, mostly ultra-high-net-worth or institutional ones, can invest in funds that buy and sell art. The Fine Art Fund Group, a London-based investment house, has $100 million under management and offers funds that specialize in areas such as fine art, Chinese art and Middle Eastern art. The firm may buy and hold work for one day or 10 years, says Fine Art Fund Group founder and CEO Philip Hoffman.
The fee structure is similar to that of conventional hedge funds, with the firm charging a 2% management fee and a 20% performance fee after the funds earn a 6% return. Minimum investments range from $100,000 to $250,000.
Like stocks, some art sectors will rise and fall at varying rates, says Rachel Edelshteyn, president of the Board of Investment Art, a Chicago-based consulting group. Investors should diversify within an art portfolio. Valuing different art classes and how they complement each other can be a tedious exercise in cobbling together numbers from auction houses, sellers and other sources.
And, quite simply, tastes evolve.
“Years ago, no one would have bought a late Monet,” says Renée Vara, an art adviser and collection manager with Vara Fine Arts in New York, referring to the artist’s later works, when he began to lose his sense of sight. “Those were considered bad. Now, I like them because they’re abstract. People’s aesthetics can change.”
October 24, 2009
The Board of Investment Art placed artist Melodie Sambat in front of many influential eyes at the 40th annual American Civil Liberty Union (ACLU) Gala held October 24th, 2009. Her work was auctioned off aside the opportunity to be the Honorary Batboy/Batgirl for the Chicago White Sox, an invitation to Playboy’s Jazzfest at the Hollywood Bowl, a sightseeing tour in Roger Pascal’s private plane, a retreat at Club La Costs in Malaga, Spain, and a private dinner by world renowned Chef Art Smith.
Melodie Sambat was born in Libreville, Gabon, to a prominent political family. As a child, Melodie and her family were forced to flee to France after her father was killed for his dissident political views. This experience framed Melodie’s artistic vision and commitment to human rights. Melodie’s work has been commissioned by several non-profit organizations in France because of her dedication to capturing the plight of the politically and socio-economically disenfranchised. The picture auctioned off at the ACLU Gala, titled “The World in My Head” employed traditional African motifs, reflecting the figurative “weight of the world” borne by political exiles and refugees.
“I thought that connecting the audience at the ACLU Gala to Melodie Sambat would be a great opportunity to pair a civic and artistic minded community with an emerging, politically conscious artist,” notes Kendra Nicole Thompson, American Civial Liberties Union and Art Broker for The Board of Investment Art.
Melodie’s work was bought at a hammer price that was one-quarter of its market value. “This is a great investment,” notes Rachel Edelshteyn, President of The Board of Investment Art.
Art prices are lower then they have been in 40 years and there are all sorts of unique opportunities to purchase art at a discount. To the notion that purchasing at a discount devalues the artist, Edelshteyn comments: “Not at all. The art market is an interesting animal. It works in man-created bubbles. Art prices in the 80’s inflated upwards of 100% as a result of aggressive promotion by art dealers, auction houses ability to create competition amongst buyers, and economic conditions. Those that bought artist’s work at early stages in their career enjoyed obscene profits at the start of the 80’s bubble. The Board of Investment Art ensures the nurturing of select artist’s careers. If we recommend adding a work from an artist that we represent as part of our client’s greater investment strategy, we ensure that we nurture that artist to success.”
The next art bubble is in its infancy stage now. As economic factors influence prices in all markets, opportunities rise. Those who can, buy low now. The Board of Investment Art offers discount opportunities while it works to promote it’s artists to gain international attention.
“We are very excited about selling Melodie Sambat at the ACLU. We plan on engaging her in several other showings in the near future. In doing so, we hope that once the art bubble reaches maturity, Melodie will be well positioned to sell high and those who purchased her work when prices were low may enjoy the same profits that many investors did in the 80’s,” says Thompson.
Given the effort that has already gone into promoting Melodie Sambat’s work, it is advised that investors get in while they can.
February 26, 2008
To the age old questions, what is art, who determines its value, who makes one artist stand out form the next and so forth; finally has defined answers; you do. The Board of Investment Art, (www.boardofinvestment.com) an online art investment platform is putting you in the position to answer these questions. www.boardofinvestment.com launched in 2008 by Rachel Edelshteyn, a progressive thinker, business strategist and pioneer in the world of art, has opened the art community to the greater culture. The user-friendly online platform enables everyday people, established collectors, artists, and galleries to display, trade, and promote art freely.
The Board of Investment Art is equal parts inspiration and transformation; a sense of “history in the making” is palpable. The savvy site tracks the investment of art over time in a very inventive way. First, the site enables you to survey graphs for your very own collection or an artists’ work that you have your eye on. The value of a piece is controlled solely by the owner, who has the tools to increase or decrease a piece’s value at their desecration.
More significantly, users can monitor artwork by a series of emotions. These emotions are then tracked by the site and can be used as a search tool or a symbol of how our greater culture is feeling; if “love” has the largest type face in the list, then that is the most common emotion art on the site is conveying to our people. Take it for what it is, or use it as a reflection of our time; in any event there is an art investment in every emotion.
Boiler Plate: About The Board of Investment Art
The Board of Investment Art, an online art investment platform, launched in 2008 by Rachel Edeshteyn, a progressive thinker, business strategist and a pioneer in the art world provides the public with the tools needed to participate profitably in the art world. The site holds several million dollars of art, ranging from $50 to $500,000 ticketed pieces encouraging the participation to novice and experienced buyers. The buying and selling of art in tough economic times is a proven investment strategy for the wealthy and elite, but with this platform it is open to the public. With the momentum of change caressing our lives, The Board of Investment Art is a home to the everyday individual to make a difference by testing the common investment strategies.
