Author Topic: Art Investment  (Read 1615 times)

dragonwalker

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Art Investment
« on: June 08, 2022, 12:49:47 PM »
I randomly got in the mail an advertisement from a company called Mater Works soliciting investment into artwork. Their pamphlet claims that through their research they purchase and securitize paintings that investors like myself can invest in. The implication is investment into famous works of art like Van Goghs, Monets, etc. It's an interesting idea for diversification. I don't know anything about the art market but I have heard and seen reports of their dramatic price appreciation. I can imagine though should this be legitimate the administrative fees could be quite high.

Has anyone looked into this before or know how valid of an "investment" this is?

Metta

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Re: Art Investment
« Reply #1 on: June 08, 2022, 06:50:45 PM »
The host of Money for the Rest of Us did a podcast on it two years ago. Basically, like all collectibles, investing in art is speculation. He goes over how Master Works works. I found it interesting. It definitely doesn't fit into my way of investing.

https://moneyfortherestofus.com/plus-episodes/295-plus-i-bonds-pension-lump-sums-and-speculating-in-art/

dragonwalker

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Re: Art Investment
« Reply #2 on: June 08, 2022, 07:27:00 PM »
Thanks for the information. I'll check it out. My initial impression is like high risk, high reward type of thing...

Edit, does this require some membership to listen to? Is it posted anywhere else?
« Last Edit: June 08, 2022, 07:28:59 PM by dragonwalker »

FIRE Artist

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Re: Art Investment
« Reply #3 on: June 08, 2022, 08:02:40 PM »
You would do just as well to purchase NFTs.  The international art market is a system that lacks oversight, is used to launder money and for black market trades.  These works of art stay locked up in freeports, shuffling between owners, so they are for all intents and purposes, as intangible as an NFT pointer on a blockchain, and just as risky.

Telecaster

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Re: Art Investment
« Reply #4 on: June 08, 2022, 08:35:54 PM »
I randomly got in the mail an advertisement from a company called Mater Works soliciting investment into artwork. Their pamphlet claims that through their research they purchase and securitize paintings that investors like myself can invest in. The implication is investment into famous works of art like Van Goghs, Monets, etc. It's an interesting idea for diversification. I don't know anything about the art market but I have heard and seen reports of their dramatic price appreciation. I can imagine though should this be legitimate the administrative fees could be quite high.

Has anyone looked into this before or know how valid of an "investment" this is?

Question: What is the net present value of the artwork?  If the answer is "zero" or "I can't calculate it" then it isn't an investment, it is speculating.

There is nothing particularly wrong with speculating, as long as you realize you are speculating.  Keep in mind, there are tons of artists who were hugely popular for a while and then faded off into obscurity.  If you are confident you can pick artists who won't fade off into obscurity, then fine art might be a good investment for you.  Do you feel confident you have these skills?

LonerMatt

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Re: Art Investment
« Reply #5 on: June 08, 2022, 09:09:07 PM »
Hello gents - an artist here to share his opinion.

IMO, there are two types of art investments: known names (Picasso, Caravaggio, Van Gogh, etc) and currently collectable I hope they make it/stay big when they die (New British Artists, Banksy, etc).

Both of these groups, when art is sold from them, are worth a lot of money - in the case of known names we're talking tens or hundreds of millions. Like Apple/Coke/etc they are brands representing value (though it's impossible to know how much or for how long). The second group don't have entry costs as high (though something like Koons or KAWS is still millions to buy ONE piece) and are likely more volatile. Will Banksy's audience showboating be interesting when he's dead? Will KAWS' commerce as art be valuable when the shine wears off? Will the shine wear off?

No one has a crystal ball and the assets pay no dividends at all. Art investment, in some cases, vastly out performs the market. If you bought, for example, a Rothko, Pollack, Picasso, etc, early in their careers you'd have legitimately won the lottery if you'd held the piece and been able to verify it's heritage. But you don't (and can't) know who will make it big.

Existing art investment vehicles, as explored in an earlier post, are basically ways for rich people to trade wealth and shelter some assets from tax or scrutiny. I would caution heavily AGAINST NFTs as they expose you to much more volatility and also much more likelihood of cybercrime. These are investment toys for the tech worker (and the blokes that want to get rich quick), but it's not clear that they will hold value even at the end of this year, or that the security will ever improve. Say what you will of freeports, I think they're awful, but you're unlikely to open your digital wallet and have all your money drained from one.

IMO, the art market is structurally capable of supporting two types of spending: you like someone's art, on its own merits, and as a fan you purchase it OR you have mega bucks and want to avoid tax by buying an already canonised artist hoping to sell that work back to another rich person or large institution for profit later on. If neither of those are you, the art market doesn't serve you and is a waste of time.

Gremlin

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Re: Art Investment
« Reply #6 on: June 09, 2022, 02:30:13 AM »
I randomly got in the mail an advertisement from a company called Mater Works soliciting investment into artwork. Their pamphlet claims that through their research they purchase and securitize paintings that investors like myself can invest in. The implication is investment into famous works of art like Van Goghs, Monets, etc. It's an interesting idea for diversification. I don't know anything about the art market but I have heard and seen reports of their dramatic price appreciation. I can imagine though should this be legitimate the administrative fees could be quite high.

Has anyone looked into this before or know how valid of an "investment" this is?

I've highlighted the line in your post that tells me whether or not you should invest in art.  Unlike the stock market, you can't get past this by buying the market.

I also wanted to point out a misnomer that I frequently see when the topic of art as an investment comes up - the idea that it's purely for speculation.  I own a few pieces and they are most definitely NOT purely for speculation.  They generate a recurring revenue - typically yielding 10% to 15% per annum.  They are rented out and sit in corporate offices around the country.  You have to know what to look for that's going to rent (a bad item can sit unwanted for years) and how to do the legwork to get them out there, but the idea that just because something doesn't pay a dividend means that it can only be for speculation is completely wrong.  Houses don't pay a dividend, yet real estate is a perfectly legitimate investment class when it is rented out and returns a yield.  Art can be the same.

dragonwalker

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Re: Art Investment
« Reply #7 on: June 09, 2022, 09:57:35 AM »
Gremlin you bring up some good points but how much can people claim to know about the art market in order to invest in it? Hard to say. I did check out their website and found some reviews online and it wasn't quite what I expected still relying on the individual investor to invest in particular pieces of art among the ones their experts have chosen to add to their portfolio. Their annual administrative costs comes out to essentially 1.5% and they take 20% of the profit of the sale with a target range of 3-10 years.

Seeing as I don't know art or for that matter have much appreciation for it than it doesn't seem to be a good fit. This just was of interest to me as a way to possibly diversify what I have. As far as asset allocation I'm essentially 90% equities of various kinds mostly in VTI/VTSAX, about 15% overall in Apple, and less than under 5% in other individual equity shares with 10% in real estate (the home I own). Maybe I'll make a separate forum post on this.   
« Last Edit: June 09, 2022, 09:59:24 AM by dragonwalker »

ChpBstrd

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Re: Art Investment
« Reply #8 on: June 09, 2022, 02:41:36 PM »
Various investment "helper" companies have come along with the promise of using crowdfunding to tap into illiquid or high-buy-in markets like big real estate projects, hard money loans, media catalogs, crypto, nfts, etc. Now we have art.

The whole premise is that retail investors are pushing back against the idea that there is no alternative to stocks at a time when stocks are expensive and volatile. People want diversification without buying bonds with negative real yields, so here come the "helpers" willing to diversify you into various things in exchange for a steep expense ratio.

Well, guess what? Bonds are likely to be offering very attractive returns by next year. Stocks are also looking a lot less bubbly than before. With all these cash-flowing choices to invest in, the things that will look bad in a few months are those investments where there are no cash flows, where risk could be hiding in obscure corners, or where the concept of the thing's value is tied to a speculative frenzy in digital assets or real estate.

Additionally, even if TINA to stocks, there are options contracts that a 100% stock investor could use to reduce their risk and volatility. These are less easy to trade than ticker-symbol-based alternative asset funds, but they are more reliable and impossible to be a mere trend or a con.

expatartist

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Re: Art Investment
« Reply #9 on: June 10, 2022, 08:26:36 AM »
I live in Hong Kong, one of the world's larger art markets. Our economy was set up to launder money via trade, which is also a function of the blue chip art market worldwide. Here, art is considered mainly an investment and secondarily a vehicle for soft power and cultural currency. We get a lot of ads for companies like these. I've looked into it to understand how it works. It can be appealing because there's often a relatively low barrier to entry. It's functioning is murky, like the rest of the art market.

Generally, art, like carpets and antiques, is not a great investment. It's expensive to purchase, maintain, and store. Collectors are happiest when they buy work from artists they know and appreciate, work they want to live with and/or promote. This tends to be paid for with disposable income, not income for investment. For the happiest collectors I know, any appreciation of the artwork is a bonus.