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Evaluating art as an alternative investment aset

Author

Listed:
  • Mamarbachi, Raya

    (Henley Business School)

  • Day, Marc

    (Henley Business School)

  • Favato, Giampiero

    () (Henley Business School)

Abstract

This paper constitutes a discussion of the trend around the proposition that art can be considered an alternative means of generating a return using structured funds as vehicles for investment. With financial markets in turmoil, art as an alternative asset class is being incorporated into portfolios in the interest of diversification. However, the volatility and illiquidity of the art market makes it hard to compare with more conventional investments. This paper will look at how investors are treating art as an asset class and how it compares to more traditional assets such as equities and bonds. We investigate two art funds, the London Fine Art Fund and The Art Trading Fund, and assess how they operate as vehicles for investment. We look at whether these art funds can be deemed successful, what has made them operate effectively, and their relative risk as an investment class. In summary we find that art’s low correlation with the equities market and desirable risk and reward ratio makes it an attractive investment, but that timing of sales and purchases plus the holding period of an investment are key criteria for generating a return.

Suggested Citation

  • Mamarbachi, Raya & Day, Marc & Favato, Giampiero, 2008. "Evaluating art as an alternative investment aset," Journal of Financial Transformation, Capco Institute, vol. 24, pages 63-71.
  • Handle: RePEc:ris:jofitr:0824
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    File URL: http://www.capco.com/files/pdf/684/01_Alternatives/09_Evaluating%20art%20as%20an%20alternative%20investment%20asset.pdf
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    More about this item

    Keywords

    art; fund; alternative; asset; class; risk; return;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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