Art investment funds retrench

abnormalreturns
November 11th, 2005

As a follow-up to one of our more popular posts, art investment funds are not taking off the way some proponents though they would. Daniel Grant in the Maine Antique Digest writes that the new wave of art investment funds have had to rentrench in the face of slack investor demand.

Ewen expressed disappointment in the failure of these funds to materialize, noting that “the time is right. People are desperate for new investments that can outperform the traditional investments.” He added that “investors are still interested, but they are doing it in a smaller, more niche way, on their own, or through clubs. The problem with clubs is that you don’t get access to all the art and financial experts” that have been assembled at Fine Art Fund and Fernwood Art Investments.

That is not to say the entire field will not catch hold eventually. However, fund operators may be underestimating the psychic value art investors put on actually owning a singular piece of art. Clearly, pioneering a new alternative asset class is not for the faint of heart.

“We’re very early in the game,” he (Mei) said, adding that “real estate investment trusts took a long time to take off” as well. He speculated that many more investors may be buying and selling artworks on their own, rather than taking part in a fund. “Art is one of the few alternative investments that people can enjoy. There is the joy of observing, the joy of doing, and the joy of interacting with people. Whether art is a good investment depends on changes in the price of art rather than on if a group of individuals can attract investors to invest in their particular funds.”