The Great Recession and Art Investment Funds
Many investors believe (or want to believe) that art remains one of the most stable and wise investments that one blessed with enough capital might indulge. Art investment funds often advertise that, whereas the price of stocks may fall sharply in one trading day, art may provide a safe harbor for those who play the long game -- particularly for works by old masters.
Boiled down to their essence, art funds are investment vehicles that are in many ways like hedge funds and private equity funds, but specialize in art and seek to maximize the rate of return on works in their collection. (From time to time, this blog will chronicle issues germane to those who invest in or manage such funds.)
Of course, such art investment funds have not been immune from the so-called Great Recession. Indeed, Bloomberg.com recently reported that Christie’s recently dropped its plans to start a an art-investment fund and a lending division, and that at least seven employees working on Christie’s financial projects have been fired or have left the London-based auction house since December, moves which augur poorly for the immediate future of the art lending business. (The article can be found in its entirety here.
The article also points out that the art market as whole continues to look -- to put it mildly -- weak. Christie’s worldwide sales of contemporary art fell 69 percent during the first half of 2009, while its New York auction sales fell 51 percent during the same period. In May, Sotheby’s contemporary art auction in New York was down 87 percent from the previous year.
