“The Times They Are A-Changin’”
As interest in traditional assets continues to erode, Wall Street is beginning to explore ways to capitalize on the growing interest in fine art as an alternative investment. An exchange called Second Market has begun to offer shares in funds that will trade art. This will have a positive impact on the overall art market as new buying entities will increase demand. However, I suspect that those that invest in the funds may be disappointed in their performance. Art is best purchased carefully with an eye toward connoisseurship, but fund managers will need a substantial number of paintings in order to offset costs and generate returns. This will necessitate a relaxation of standards, that is, if the managers have any understanding of the nuances that influence value.
Those of us that collect should be encouraged as new capital will improve liquidity and many years of interest, and study and participation will give the astute collector an advantage. This is what is truly best about the acquisition of paintings as it relates to investment potential. The informed buyer knows as much, if not more, about the work as anyone. The asset is not veiled in murky layers of complex distortions that circumvent the truth. A work of art is one of kind, without multiple shares, options, or derivatives. Transparency is the collector’s greatest ally.
So let’s welcome the big boys, let them come at us full force. This is our game!
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