Simply about the difficult: Art Investment. The end
ARTinvestment.RU   04 марта 2020

At the end of the article, we will consider a typology of investors in art, and list their major mistakes

the First and second part of the article can be found here and here

From the previous material we remember that the motivation of investors into objects of art can be divided into three groups: emotional, financial and social. In the modern world it was virtually impossible to meet one of the motivations in "pure" form: today, the buyer has all three components, depending on the ultimate interests of the investor — in different proportions.

1. A typology of investors in the art:

• "Old money"

Collectors began to form a collection in the "Golden age" 1950-60-х years earlier. Unfortunately, these people today we often read in obituaries.

• "New money"

Generation Y, Millennials — conditional, born from 1980 to 2000, and made the first capital on business connected with technology. They also can be attributed to rentiers — heirs of "old money", subject to the interest in the continuation of collecting.

• Sponsors

Collectors (mainly in the USA), which since the mid-1980-х began to use a strategy to optimize the taxation. Objects of art are purchased in a collection, evaluating them in the purchase. A few years later revalued assets and new estimated value of works transferred to the Museum — and philanthropist exempt from tax on profit from primary activities in an amount equal to the higher estimate.

• Art-дилеры and galleries

Professional art dealers often buy for yourself — who, if not them, know inside information about the upcoming increase in the cost of individual artists. First of all it concerns modern art and artists under contracts that gallery.

• Museums and affiliated funds

the Museums also sell objects of art: to year the number of transactions purchasing, selling and exchange in the global Museum environment can reach 100 thousand. State museums are more focused on the artistic value items, private museums can afford the investment approach to formation Assembly.

• Professional-invest-менеджеры

On the assessment of the Deloitte / ArtTactic, from 2000 to 2019, the number of companies managing private capital, including the portfolio of art objects has increased by 30 %. Adding to traditional assets, art managers primarily focus on the social component of the asset to support the existing businesses of the owner of the capital.

• Traders digital assets

In recent years, tokenization art, ie, the output of the digital equivalent of stocks and derivatives with subsequent equity ownership, is actively discussed at all levels, from the community of followers of cryptocurrency to the technological summits organised by Christie's. The existing restrictions of the regulators of major countries (the US, Russia, China) do not currently allow the use of this tool in full, however, with the development of the legislative base in the field of digital asset licenzirovanie art can not only significantly increase the annual turnover of the market, but also to increase the liquidity of the objects themselves.

2. The main strategies used by the investors inart:

• Portfolio

the key word here — diversification: purchased are of different periods, areas or countries. In other words, to reduce the risks the emphasis is on versatile artists of various styles and eras.

• Origin

a Strategy based on work with the most complete set of documentation: the origin of the work, provenance, expert opinion, the presence in the directories-резоне and so generally this applies to artwork that you created earlier 1950 (old masters, Impressionists and modernists).

• Marketing

on the basis of this strategy — working with contemporary art and its main indicator: marketing activity of the artist. Characterized by a short period of holding work (1-4 years) and an emphasis on artists practicing aggressive marketing (high-volume sales, high-profile exhibitions, scandalous relationships, etc.).

• Inside

the Main asset of this strategy — are not themselves objects of art, and inside information about the future of the artist or segment of the market. This information is typically provided by the people in the art world, having access to unique data or the formation of opinions of the majority. As a rule, the investment portfolio they share.

• Collective ownership

Mutual funds, with an asset of artistic value (better known as art-фонды) — major players in the investment market in art. Pools of assets of such funds may be up to half a billion dollars. Collective ownership implies the combination of portfolio strategies and inside, and closed the operating cycle is the average period of 6-8 years (more about art-фондах we describe in the next article AI).

3. The pitfalls of investing in art

• Attribution and authenticity

Along with fake works in the market there are fake opinions, valuation, provenance and fictitious names of experts and institutions etc. in One word, can forge all the documents surrounding the subject of art.

• Bad story

the Objects of art confiscated by the Nazis in the years 1933-1945, stolen works, arrived in the country of sale without customs clearance, the assets acquired with the use of schemes for money laundering, etc.

• Trade restrictions

Some of the art objects and the materials from which they are made, you are free to bring in sales, but is impossible to remove. Others, on the contrary, prohibited to be imported in a number of States (it may have a negative impact if the prospective buyer — resident of such country). All of this should be taken into account when determining the object of investment.

• droit

FR. droit de suite, eng. resale right — total title claims to the right of the author in the resale of work. In accordance with the Berne Convention of 1887, and later regulations of individual countries, any resale of the work to a third party to the Creator of a work of art relies on a certain percentage of the transaction. With the exception of cases when the author has voluntarily signed a waiver of those requirements in the first sale.

• Tax deductions

In which country is better to make a purchase? Is there any between the countries of buyer and seller agreementthe abolition of double taxation? All this should be considered in advance to minimize costs.

• Commission on transactions

Sometimes unaccounted Commission for the purchased work can negate marketing and financial calculations of the investor. It should always be remembered that in transactions with objects of art from-за various commissions purchase cost will rise, and sales — to decrease. The task of the investor — to choose the most effective option among the proposals from auction houses and private dealers.

• Limit controllers digital assets

Above, we have written about this, citing the example of traders and tokenization. But again never hurts.

4. Features of investing in art unlike other assets

• Focus on investment properties

the Concept of investment quality implies a certain slice of the art that most likely will bring the investor the expected rate of return. Portal Artprice in the report 2018 allocates work, with a value ranging from $200 thousand to $1 million as the most investment attractive: items purchased in this range, on average, show better growth rate cost — of 8.2 % per year. The most successful art-фонды understand the investment-quality art prices range from $250 thousand to $5 million: below the range to buy is meaningless, because the management of the collection "eat" profit above $5 million is not recommended to buy, in order to avoid speculative margins.

• Avoidance of works of dubious origin

Shares on the stock exchange can't be fake, and the collection bags are not subject to repatriation. If the slightest doubt about the authenticity of art objects or of change history of their past owners to buy these things for investment purposes is not recommended.

• Minimization of costs of acquisition and maintenance

unlike many other assets whose capitalization does not depend on the owner, art, everything is different: since the acquisition, everything is in the hands of the investor. However, the most sound approach — to calculate the cost of commissions and content to the transaction. Perhaps in this case, the investor will change the decision regarding the segment of art, the author or the geography of the purchase.

• Purchasing at a discount

One of the main precepts of the investor in the arts says: buy the dips, sell on the rise. "The decline" does not necessarily mean the economic crisis, it can be difficult financial situation, which turned out to be the owner of the work: then he can buy it much cheaper. Successful art-фонды buy at a discount of 30-70 %, but it is necessary to have access to information about the collectors and their problems.

5. Sources of information for decision-making by the investor:

• the Register of artists

a Database of all artists present at public and private market, living and dead. Typically, these are printed publications that do not have online-аналогов.

• the Directory-резоне

a Registry of all works by one artist, ideally with an indication of provenance (the history of existence) of each work. For example, selection electronic catalogs-резоне provides all IFAR, the international Foundation for researchart.

• a Database of sales.

the results of the public sales (auctions) that contain archival data, and regular updates. For Russian and post-советского art most comprehensive source is base ARTinvestment.RU.

• Base imitations and restrictions

Individual databases on works of dubious attribution, obvious forgeries, stolen, or not found works, samples of signatures of artists and works of art, subject restitution.

• Database marketing activity of the artists

Include details about exhibition activity, participation in competitive programmes, biennials and fairs, the availability of works in museums and private collections, contractual relations with galleries and performance artists, private dealers. The most complete such database to find Artfacts.net.

the following material is "Simply about complicated", armed with knowledge about investments, we consider one of the forms of their practical application — investment art-фонды.

Denys Belkevych, AI