Art. Appreciation.
 

Art is beautiful. It illustrates, communicates and enhances the human condition. It has been shown to promote health and healing – hence the very significant investments in artwork in most major hospitals.

But this begs the question -how does that investment fare - as an investment ?

While we never suggest purchasing art for any other reason than love of a particular work, in these days of uncertain markets, we thought we’d do a little research. What we found was interesting, and for those of you wondering how best to allocate your resources, we think the following is worth considering.

The Mei Moses® All Art Index (www.artasanasset.com) indicates that Art, as an asset class, when viewed over a long timeframe, has returns approaching that of the S&P 500, but that significantly, it has considerably outperformed in 5 and 10-year indices. It has also significantly outperformed US Government bonds and Treasury Bills and even gold over longer time horizons. Specifically, according to the authors, as of 2007, the most recent annual five and ten year returns for art, at 16.2% and 10.3%, exceed the returns of stocks, 12.7% and 5.9% respectively.

Another interesting point that may be extrapolated from the data is that higher returns are realized not by purchasing “masterpieces” (which actually tend to underperform), but rather those works in the $1000 – 10,000 range. The data show many more points with returns above 20% (and several approaching 80%) than the 100,000 – 1,000,000 range.

Finally, Mei & Moses looked at risk vs. return, and concluded that between 1955 - 2005, adding art with the performance characteristics of the index to a diversified portfolio of stocks, bonds, cash and gold tends to reduce the risk of the portfolio for most levels of return – by as much as 3%.

Given the research, why not make your next investment art? It’s certainly more enjoyable to look at than stock certificates or bonds, and can enrich your life in more ways than one. Still not conviced? Try here ( http://art2bank.com/art_investment/ ).


Function+Art / PRISM