Art Funds are dependent on a successful resale of the artwork. Thus, the management of an Art Funds must see a "deal" meaning the work is being sold for less than it's worth or that it could increase in value over time. Possible problems in accumulating art could be overestimation in an artworks value or lack of demand or appeal for the artwork. Thus, it is important for the fund to consider holding onto the piece until the demand increases, however, this could result in a negative cash flow.
I was most fascinated to learn that during certain time periods, there were threats to the success of some art investment funds and to see how certain investment strategies were created to counteract possible failure of their investment portfolio.
Because Art Funds turn the art market into an industrialized market, there is little to no appreciation for uniqueness or outlandish art, but only for art that will have commercial success.
When considering my own Art Fund I would consider how important it is that the investment lies in its resale. It is important to accumulate art that could have commercial success. I would also consider how important it is to hold onto art for long periods of time to increase it's value. As prices are generally hard to predict and are subject to buyer's preferences, this makes resale value difficult to ensure. Therefore it is important to invest in up and coming artists where the seller is able to name a price without being subject to the comparison of other works that have been sold. I would consider that the value of art depends on its uniqueness and scarcity. In order to create a stable, viable and successful art investment portfolio I would consider the following strategies:
- Having diversity in mediums, genre and notoriety of the artists. If my fund were to focus exclusively on contemporary art or old masters I would be limiting the collection's worth.
- By accumulating a diverse collection of artwork including different mediums and many genres, I could maximize the value of the collection by appealing to many different audiences and being involved in many areas of the art market. Remember there is resale value in all genres of art!
- Diversity in notoriety of artists is also important in establishing a successful art fund. It is important to have very famous and well known works but also important for the fund to invest in up and coming artists.
- In particular I would invest in old masters that are limited in quantity. Specifically, I would invest in Rembrandt's work because he is an extremely brilliant artist who has worldwide appeal. In addition to his global recognition I believe Rembrandt's work will increase in value over the next couple years as enormous amounts of money are being spent towards attributing and de-attributing his paintings. In particular, new technology has allowed the University of Amsterdam and the Rembrandt Research Project to re-attribute paintings that were previously thought to be paintings done by Rembrandt's pupils. In addition, the Rembrandt Research project has de-attributed paintings hanging in both the Hermitage Museum in St. Petersburg and the Metropolitan Museum of Art in New and are now being called "School of Rembrandt." In one particular case a private investor purchased a painting called Old Man with A Beard for $40,000 in 1998 which was sold as a work done by one of Rembrandt's pupils. The Rembrandt was later re-attributed thanks to x-rays and a particle-accelerator as two paintings were found underneath Old Man with A Beard. This painting is now worth $13 million US dollars in 2011.
- I would steer away from investing in Koons & Hirst as I think the appeal of their work is a fad and I believe the mass production of their artwork and prints will cause them to devalue over time.
- I would invest in up and coming artists such as Jasmina Danowski who paints very colorful abstract works with watercolor and oil. When searching for an up and coming artist it is important to consider how commercially successful the artists will be. I would choose Danowski as I believe she appeals to a wide audience and thus will have a huge resale value. It is important to invest in very "safe" artists that appeal to a wide audience and also to invest in perhaps one or two obscure artists who may not have as a commercial appeal but who create very special and unusual pieces.
- I would invest in a more obscure up and coming artist like Pasquale Cupari. His pieces are very unusual and he mixes different mediums. I cannot see his paintings being very commercially successful but I think there are buyers who would appreciate the bizarre pieces he creates.
- It is through the exposure of the new up and coming artists the fund will endorse that will generate the largest profit. If the fund hangs onto all it's investments, the demand for each artist will likely increase after much promotion is done.