As with any investment, investing in art comes with a lot of options, one of which is art funds. Our expert art advisors have compiled everything you need to know about art investment funds in order to help you streamline your decision making when it comes to investing.
There’s a lot of information on this subject, here’s what we’ll be looking at throughout this article:
- What is an art investment fund?
- Who can invest in an art fund
- Who manages an art investment fund?
- What’s the history of art investment funds?
- Are art investment funds beneficial to the fine art market?
- What art investment funds are available now?
- Best alternatives to art investment funds
- Create a fine art investment portfolio that you control
What Is An Art Investment Fund?
Art investment funds are privately managed portfolios set up to generate returns on investment through the acquisition and selling of artworks.
Although the fundamental characteristics of art investment funds are diverse and vary from company to company, they mostly all operate on the traditional strategy of buying and holding artworks and then selling them when the value has risen.
Structured much in the same way as other investment funds, art investment funds allow investors to partially own an artwork or collection of artworks.
Traditionally, an art investment fund is a privately managed art portfolio held by a credible team of experts that buy, store and then sell artworks for a profit, some of which is then distributed to investors.
A more modern form of art investment fund has been established on the securitisation of artworks.
For this method, a fund manager will acquire blue-chip artworks on behalf of its investors and create a holding company for each piece of art in order to acquire, store, promote and resell it. Each artwork’s holding company is registered with the relevant financial authorities and shares are issued to those that have invested in that particular artwork.
Who Can Invest In An Art Fund?
Art fund investors generally come from a wide range of financial backgrounds; especially with more and more modern companies lowering the barrier to entry for those looking to invest, even with a restricted budget.
Many of the more distinguished art investment funds have a formal application and screening process that can often pose an obstacle to everyday investors who may not meet the scrutiny of the fund managers. As previously mentioned, however, there are now other options including public art investment funds and alternative investment platforms that let almost anyone become an investor.
Those investing in art funds know why they want to invest in art, usually have some prior knowledge of the art market and wish to diversify their investment portfolios with this type of asset, as well as having it as a hedge against inflation.
Who Manages An Art Investment Fund?
Most art investment funds are administered and managed by professional investment management firms made up of a combination of financial industry professionals, art market experts, and professional investment advisors.
This combination of experienced professionals is crucial for avoiding the pitfalls of art fund management that can arise from a lack of experience in managing an investment fund, or the lack of knowledge as to how the intricacies of the art market work.
Generally speaking, art fund managers invest a substantial amount of their own capital into the art funds they’re managing, thus aligning their interests with those of their investors.
Some of the tasks of art investment fund managers include:
- Identifying potential acquisitions
- Raising capital for the funds being managed
- Investor relations management
- Investment strategy development
- Asset management; storing, maintaining and insuring the artworks
- Art market monitoring
- Showcasing the assets through exhibitions and museum loans
- Managing the disposition of fund assets
What’s The History Of Art Investment Funds?
Art investment funds have been established for over a century, with their creation recorded in the early 20th century through history’s first art investment consortium ‘The Skin of the Bear’.
The name ‘La Peau de l’Ours’ or ‘The Skin of the Bear’, was taken from a 17th-century folk tale with the underlying message that one should “never sell the skin of the bear before killing it”. This message was chosen to highlight the financial risk posed by the fund.
Created in the art world’s first epicentre, Paris; the group was made up of 13 Parisian investors, with the renowned lawyer and financier Andre Level at the head. From 1904 to 1914, Level spent his time acquiring artworks from emerging artists that at the time included Henri Matisse and Pablo Picasso.
Part of the intention of this art fund was to support those emerging post-impressionist artists and the fund was run as a syndicate, each member contributing identical amounts as a means to acquire a collection of artworks.
Andre Level managed the fund and arranged the disposition of the artworks within it; using his art market knowledge and business acumen to full effect. As paintings were sold, he would receive 20% of the sale price, and the artists behind the works would receive 20% of the fund’s profits on top of what they received for the original sale of the artwork to the fund. The investors would then receive the rest in equal parts.
This first art investment fund was a huge success and resulted in sizeable returns for those that invested.
History since then has seen other highly successful art funds; such as the British Rail Pension Fund.
Are Art Investment Funds Beneficial To The Fine Art Market?
There’s no doubt that art investment funds benefit the art market in a number of ways, providing benefits to both the market and investors.
By raising funds from investors not currently investing in art, they bring new money into the market; this provides additional liquidity and helps to stabilise the market during economic downturns, and it also fosters a continued appreciation of value.
Art funds allow investors the opportunity to pool their funds with other investors in order to stake a claim in rarer and more sought after artists and artworks. They also provide the added benefit of the experience and knowledge of the art fund managers who specialise in navigating the art world.
What Should you Look For In An Art Investment Fund?
There are many things to consider when looking into an art investment fund. First and foremost should be the reputation of the art fund manager and their position in the art world. Do they have a proven track record of results?
You should also look at the portfolios maintained by the art funds and scrutinise their choices; after all, you’re not investing in something intangible like stocks, you’re putting your capital towards expertly crafted tangible assets.
A reputable art fund manager should be able to easily explain the reasoning and strategy behind the particular artworks and collections they have chosen; remember too that this goes beyond just aesthetic qualities as the value of art is mostly subjective.
It’s also worth learning exactly what services the art fund manager provides, especially in terms of how they store and care for the artwork.
What Art Investment Funds Are Available Now?
When it comes to art investment funds, there are many options available and as a result of the changes to the art market since the pandemic, investment has become more accessible than ever before.
Here are some of the industry-leading art investment funds available:
The Fine Art Group
The Fine Art Group is a global team of art advisors and finance experts. They offer a diverse range of investment opportunities and aside from that, they manage their own collections as well as those of their high-profile clients.
They pride themselves on an ‘unrivalled track record across the art ecosystem’; and their recent acquisition of Pall Mall Art Advisors has brought a greater depth of knowledge and experience to the firm.
With continuous growth and a 20-year track record of billions of dollars in assets under management, they certainly have a strong reputation in the art fund space.
Arthena is a quantitative art investment company with its art investment funds managed using artificial intelligence to generate statistical models that project the value of an artwork over time.
Simply put, Arthena uses mathematics to optimise the return on investment and volatility of art investments.
Arthena’s proprietary analysis model has managed to secure data on $95 billion worth of assets over the past 4 years and regularly publishes reports on the art investment market.
These analyses are extremely informative to investors and work well as a complementary tool but it should be noted that they’re not 100% certain. Arthena’s art fund is something to consider for investors who are looking for a different approach to art investment.
Masterworks was the first alternative investment platform to formally securitise art.
In doing so, they allow investors to acquire fractional shares of blue-chip artworks which are transported, stored, insured and maintained for a fee.
Shares begin as low as $20 and investors have the option to trade their shares on Masterwork’s secondary market after the initial offering.
Whilst not technically an art fund, it has similar undertones and works as an art stock market. Masterworks operates as both the broker and the company that creates value for the shareholders by ultimately selling on the artwork and distributing the profits to the investors.
Yieldstreet is a platform offering passive income opportunities for investors through alternative asset classes.
With $2.5 billion invested on its platform, this fast-growing company has been establishing their place within the market.
Yieldstreet is often a top choice for those just starting to experiment with art investment funds.
Artemundi has managed numerous funds worth billions of dollars in art since 1989 through their team of global experts. Known as one of the highest-performing international art fund managers, they have an impressive track record of good returns on investment.
They also have public offerings and are transitioning to securitised art tokens with the adoption of blockchain technology.
Best Alternatives To Art Investment Funds?
Art is considered a legitimate asset class and has been known to frequently outperform the stock market.
In some ways, securitising artworks and selling individual blue-chip artworks as shares has made art investment more accessible; buying and selling shares can be an easier entry point for the average person than trying to buy a blue-chip artwork outright.
Art investment funds can be one way to get started with art investment without ever taking possession of the physical asset.
If however, you’d prefer an alternative to art funds that enables you to own the physical artworks, have a collection that you can proudly display, as well as be in control of when it comes to selling, we offer a bespoke art investment service.
Limited edition prints of blue-chip artworks are a great way to affordably own a piece of artwork from a renowned artist at an affordable entry point, and it’s wise to invest in artists at different career stages in order to create a diversified portfolio.
S&P Gallery offers exclusive access to artworks from emerging and established artists as well as a range of blue-chip artworks.
Our expert art advisors carefully study the art market, closely observing trends and keeping an eye on art performance indicators in order to make the most of the potential future profitability of the artworks.
We can help you build a bespoke art investment portfolio that can be sent to you via secure shipping or can be kept safely in one of the state of the art warehousing facilities that we have access to; all of which have industry-leading security systems.
Create A Fine Art Investment Portfolio That You Control
At S&P Gallery we specialise in providing the highest level of confidence in the art market and art investment.
If you’d like to take the first step in your art investment journey, or if you’re looking to expand or diversify your portfolio, contact our expert art advisors for the finest professional art investment guidance.
To learn more about the benefits of investing in art and investing with S&P Gallery, as well as our market performance some of the returns realised from our clients, you could also download our free art investment guide, which is packed with valuable information and insights.