Some 80% of the worldwide sales of artwork with sticker prices above $10 million take place in New York, but precisely because sellers rush there, buyers and investors may want to look at other places for opportunities.
Such investors may do so without traveling by investing in Art Vantage, a new closed-end fund with a maturity in 2022 -- though advisors say to proceed with caution.
The fund has the holdings of the Tiroche DeLeon Collection of Contemporary Art from developing markets. Shares in the Art Vantage fund have risen about 7% in the past year.
Started in January 2011 by Serge Tiroche and Russ DeLeon, the Tiroche DeLeon Collection focuses on artwork by artists in developing markets, soon to become “masterpieces,” according to the promotional material.
Grant Thornton and KPMG serve as the fund administrators and auditors.
Ronald A. Friedman, a certified financial planner at San Diego-based Friedman Brannen, whose practice is based on flat fees rather than asset management, echoes the sentiments of other financial advisors when he expresses caution about investors jumping into a fund invested in artwork from outside the United States.
Friedman, who specializes in helping value art investments for estate and gifting purposes, says “You have to be very careful.”
Outside the United States “issues in provenance” tend to grow, he says. “It’s hard to know where the stuff came from and if it is real,” Friedman says. “It’s a funny market and a fickle market, and trends to seem to change.”
Rick Keller, the founder and chairman of Irvine, Calif.-based First Foundation Advisors, agrees. He specializes as a financial advisor for art collectors’ concerns.
None of the art-related investment funds “have ended up as attractive as initially billed,” Keller says, so he doesn’t expect one focused on emerging economy artists to perform any better.
He does have one client who has invested effectively and made a business out of artwork from emerging economies. But that client remains well informed about myriad sophisticated issues related to the art that Keller suspects would hobble many other investors.
Keller thinks that all stakes in emerging countries’ art would qualify as “speculation rather than investing.”
“You have no way of establishing the value. You have to operate on a who-is-the-greater-fool principle,” Keller says.
His simple but wise advice about art purchases? “Buy what you like, and hope you don’t overpay.”
Miriam Rozen, a Financial Planning contributing writer, is a staff reporter at Texas Lawyer in Dallas.