Leading art investment fund wound up
May 8 2015
Picture: The Fine Art Fund
There's an interesting snippet in the FT from Georgina Adam, reporting that one of the leading art investment funds is to be closed:
The Fine Art Fund is winding down its first fund (started in 2005/06) and, says director Philip Hoffman, “has returned all the initial capital to investors”. Over the next three years, it will sell off the last nine works in that fund. Returns are expected to be between 4 and 7 per cent net, says Hoffman, who explains that the result has been “dragged down by sluggish yields” on Old Master paintings.
This outcome is disappointing, says Michael Plummer, of art investment firm Artvest: “Expectations are according to risk, and art falls between ultra-safe US treasuries with no interest and private equity or venture capital investments at 20 per cent, so investors could have expected a result in the teens. When you consider that the period the fund covered saw the greatest growth in value the art market has ever known, they could have expected better.”
Regular readers will know I often caution about seeing art as an investment in the short term, which is the sort of horizon investment funds like this must work on. The problem is not that paintings, even Old Masters, don't go up in value over even the short term, but that the market is so illiquid. You need to be sure of making in excess of 30% profit on a painting to take care of just the transaction fees. Add in the fees an investment fund charges, and it is very difficult to make short term gains on Old Masters. Unless you're in the sleeper game of course, but that is a whole different ball game, and the risk factor goes through the roof. So remember, even though Old Masters are a useful medium to long term store of value, you should first buy art because you like it.
