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The Fine Art of Investing in Collectibles
07/16/2012 9:00 am EST
Focus: ALTERNATIVE INVESTMENTS
With alternative investments increasingly in the spotlight, Artnet has developed indices and analytics to track the value of fine art. Thomas Galbraith, the firm’s director of analytics, discusses the purpose behind the data gathering, and how collectors, investors, and advisors might use this information.
Kate Stalter: Today, we’re covering a different topic than we normally do here on The Daily Guru. Our guest is Thomas Galbraith. He’s Director of Analytics at Artnet (Frankfurt: ART).
Thomas, one of the things that does come up quite a bit: More and more investors, as well as advisors, are turning to some alternative asset classes, particular as the equity and bond market perhaps are not as reliable as they’d like them to be. Tell us a little bit what you’re finding with regard to art as an investment.
Thomas Galbraith: I can tell you that the interest in art as an alternative asset has seen a significant uptick in the past few years, and that has been seen most rapidly in the past year to six months.
In large part, that’s why we put together an indexed product and our Artnet analytics reports. It’s in response to the fact that so many advisors out there have clients who have an art collection, are already invested in art, but the advisor isn’t necessarily part of the story. So the client may be diversifying, but the advisor isn’t necessarily participating in that diversification.
One interesting data point is that Jackson National Life just came out with the result of a study they did of advisors, which determined that around nine in ten advisors are expecting to see an increase in the use of alternative assets, and often more than 90% say that they’re looking at doing that in other areas that they’re not necessarily accustomed to. One area in particular is art, which as I said, clients and collectors are very much involved in…but the advisors have yet to participate in that story.
Kate Stalter: You brought up a few points here that I could follow up on. I did spend some time on your Web site, and I noticed that you have already been tracking some databases for fine art prices, decorative art prices, and so forth. Talk a little bit about how you are formulating the index.
Thomas Galbraith: Artnet is an online data aggregator. It’s a little bit like Bloomberg for the art world, essentially. It’s also a publicly traded company out of Germany. But essentially, we monitor 700 auction houses worldwide, and we aggregate the sales data into our database. So it’s somewhere in the region of 8 million lots within our database.
That’s very straightforward database and data gathering. But then from an analytics perspective, what my department does is, we actually break that out and use the core data to derive indices for individual artists, and also the specific series that they’ve produced. For example, a Damien Hirst spot painting may perform differently from a Picasso nude. So we’re able to show the performance of these works over time against other asset classes.
Kate Stalter: One other thing you mentioned a moment ago that I was intrigued by: You said that advisors may be behind the curve when it comes to working with their clients to get them into some of these art investments. Are you hoping to reach out to more advisors, to make them aware of your index?
Thomas Galbraith: Absolutely. We very much created the product to provide transparency and to bring in advisors and the financial community into what is otherwise seen as a rather opaque market.
Prior to our reports, it was really quite difficult to see in any clear fashion how the art market was performing. So what we wanted to do was translate the performance of the art market into a language that advisors or the broader financial community can easily understand and easily digest.
One of the best ways of doing that is with an index. That’s in large part why we did what we did. And we are also believers in transparency. This really does help in bringing some kind of examination to the art market that otherwise wouldn’t be possible.
Kate Stalter: Do you see any time or any way that in the future, there might be any kind of ETF that’s formed as a result of this index?
Thomas Galbraith: Great question, Kate! If there is one, it would be pegged to one of our indices at Artnet. It’s something which I think is on the horizon, and we’ve been approached by a number of companies looking to do just that.
At what point that will happen, I’m not sure. But we’re definitely working on doing something and aiding financial institutions and creating a product like that. We would be obviously the licensee of the information.
Kate Stalter: Thomas, if any of our listeners are interested in more information just about the art market in general, how to begin investing there, or about the data in your index, what’s the best way for them to follow up?
Thomas Galbraith: They’re more than welcome to log onto our Web site to have a look around in there, and also to contact me directly. My e-mail address is TGalbraith@Artnet.com.
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