Art market

New books on art investment aim to capitalise on the emerging field

However, too much knowledge can be confusing... even when it is as well selected as this

At first glance, Clare McAndrew’s Fine Art and High Finance: Expert Advice on the Economics of Ownership looks a bit too familiar. Over the past few years, as the mainstream investment community has begun to show an interest in art as an asset, various experts have capitalised by editing books of essays by leaders in their field. Some of the usual suspects have contributed to this new tome: the economist Jeremy Eckstein again writes (albeit excellently) on his involvement in the British Rail Pension Fund and the lessons that can be learned for art funds (he contributed a chapter on the same theme to Iain Robertson’s The Art Business, 2007), and various contributors to James Goodwin’s International Art Markets: the Essential Guide for Collectors and Investors (2008) appear again in McAndrew’s book (she herself wrote a chapter on the Irish market for this guide).

But it is perhaps no bad thing that a previously under-studied subject matter is having its day in the sun. And credit must be given to McAndrew and her chosen writers who make a concerted effort to speak to investors in their own language.

Some of this is difficult to swallow for the uninitiated, particularly in the chapters on art price indices and art risk, by the academics Roman Kräussl and Rachel Campbell (the latter includes the inscrutable sentence “Beta measures the covariance of a particular asset in relation to the rest of the market or whatever the chosen asset base is” before finishing with some very sophisticated formulae for assessing risk in art investment).

Despite this, the first half of the book is the most dynamic as it deals with issues that are most relevant to the market today, such as how art is appraised and the practice of art banking. These chapters suffer a little from having to insert health warnings throughout (like all good investment advice, readers need reminding that it is only advice). Words like “inscrutable”, “problematic” and “complex” are applied to the art market and by the end of the introductory first chapter—which early on says “there is essentially no such thing as ‘the art market’”—readers might begin to wonder if there is any point at all of trying to make money out of art. Subsequent information about the holding cost of art (estimated at between 1%-5% of a work’s value) and the high level of investment needed to participate in an art fund (at least $250,000), are also somewhat off-putting to would-be investors.

The second part of the book (that covers subjects including tax regimes, estate planning, regulation and conservation) is arguably more helpful as these chapters provide a practical context to art ownership that is often overlooked. One of the most interesting chapters is called “Art and Taxation in the United States” in which the art lawyer Ralph Lerner of Withers uses individual legal cases to illustrate his points.

McAndrew, more than her predecessors, makes a convincing case that art—while perhaps not a market in the conventional sense—is still an asset class worthy of economic analysis. She can’t provide the luck, circumstances and the “good eye” that could guarantee a great investment. But her book offers the best practical information for an experienced investor who fancies a bet on the “problematic” art market.

o Clare McAndrew (ed), Fine Art and High Finance: Expert Advice on the Economics of Ownership (Bloomberg Press), 288 pp, £26.99 (hb) ISBN 9781576603338

Originally appeared in The Art Newspaper as 'Too much knowledge can be confusing...'

Appeared in The Art Newspaper Archive, 215 July 2010