From the reading it seems that Art Investment Funds are definitely a risky way to invest. The funds have rarely been successful with the exception of the British Rail Pension Fund created in the 1970’s which really was not even as successful as it appeared. While in theory investing in art may seem like a sure way to make money, the uncertain and volatile nature of art value has shown it to be much less straightforward. The continued interest in this type of investment is curious given its history of failure.
I find the idea of Art Investment Funds disturbing in its lack of regard for art’s intrinsic value. Even more than anything we have seen thus far, the Art Investment Fund is concerned with nothing more than art’s monetary value. The comparison between real estate and art investment was also concerning. How can we guarantee that a bubble is not being created that will eventually pop? I also noticed that some of the funds allow their members to display the art from the funds in their homes. This seems like another significant risk, what if a piece is not cared for properly or accidentally destroyed? What if a member has a piece of art and the fund fails, does the member get to keep the art? What if they refuse to return it in order to regain at least some of what they invested? While I’m certain that the works are insured and the members have signed contracts that stipulate how everything will function, it still seems like there is a high potential for problems.
While the Tosca Photography Fund seems to be functioning acceptably, I certainly would not invest my money in an Art Investment Fund unless more evidence of stability could be presented. Speaking hypothetically, if I did invest, I might do the following:
1- Buy lesser known works by established non-living artists.
2- Buy works from contemporary artists on the verge of success, before the price for their work become excessive.
3- Make sure to mix the type of art to include paintings, photos, and sculptures in an attempt to diversify the portfolio and hopefully better the chance of returns.
4- Limit the number of investors in an attempt to maximize individual returns.
5- Hold the works until their value appreciates considerably.
Here are a couple examples of the kind of works that I would try to acquire for the fund:
A work by an established non-living artist:
Diego Rivera’s “Mujer Bañandose” which recently sold for $116,500 at Sotheby’s but I think has the potential for a higher value in the future.
A work by an emerging artist:
Adam Pendleton’s “System of Display, E (ETERNAL/Against/Jean-Luc Godard, Le Grand Escroc, episode from Les Plus Belles Escroqueries du Monde, 1964)” which was displayed at Art Basel 42 in the Art Statements section.