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Art Investments – The Beautiful Side of Asset Allocation

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“Diversification and patience are two key elements for understanding Art Investments” says Ofer Levin financial strategist and art collector

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Edgar Degas, the famous French Impressionist artist, once said: "Art is not what you see, but what you make others see." While some find in art comfort and inspiration, or simply admire its aesthetic value, others might see works of art as an investment. Historically, art has been bought and sold at least since the Middle Ages.

With the emergence of movable works of art and the emergence of a collectors market new venues developed both sell and buy works of art.

Investing in Art

The global art market has expanded enormously over the years and is now worth over $60 billion thanks to cultural globalization and the Internet. The reasons for investing in art are varied, art admirers, seekers of respect and prestige and others who are more interested in the financial benefits that art has to offer.

"Two key elements are essential for understanding art investments," says Ofer Levin, financial strategist and art collector, "The first one is diversification. Historically speaking, the art market has maintained un upwards momentum, especially when comparing it to well-known financial instruments. Art might serve well as a means to reduce risk in times of temporary weakness in equities, bonds or any other financial instrument."

Ofer Levin: "Investments in any market drop at times of violence. This is particularly true in the case of the Israeli art market." 

"However, this does not necessarily mean that short-term downturns may not occur from time to time." continues Levin "Indeed, several major price falls were recorded in our modern history. In 1930s due to the Great Depression, in 1991 following the collapse of the asset price bubble in Japan, and in the global financial crisis of 2009. What the world is experiencing since 2020 with the outbreak of Covid-19 is another major event causing falls in sales at several segments of the art market. This brings me to the second element which is the importance of patience, or in other words, holding investments in art for the long-term. In the 1991 crisis, for example, the auction market plummeted more than 60% and, as a result, prices were impacted for a long time. In fact, it took more than a decade for sales to recover to their 1990 level. So, if you are considering investing in art always think long-term."

Israeli Art Market

The Israeli art market was estimated not so long ago at around $50 million a year. But it was not always like that. Until the 1950s there were no more than a dozen Israeli artists who could make a living from their work and the very few Israeli art collectors active back then used to pay a fixed price of about 10 liras to an artist per painting (around $110 in today’s worth). Only after the Sinai Crisis in 1956 and the rise of the purchasing power of the country did prices began to climb up. Already in the 1960s oil paintings by artists such as Marcel Janco, Nahum Gutman or Moshe Castel were sold for an average of 1500 liras (around $5,500 in today’s worth) per painting.

However, over the years the art market has grown dramatically especially since the 1990s. From 2000 to 2010 the market’s turnover reached approximately $180 million, with 2007 being one of the best years of that decade with over $30 million worth of sales. Following the global financial crisis prices plummeted by around 40%, but the market recovered relatively quickly and made way for a fresh start with a new decade.

"One should always bear in mind that Israeli art market is subjected to both local and global events. When the dot-com bubble burst, for example, in 2000, its effects could be felt along with the acts of violence that followed the failure of 2000 Camp David Summit," explains Ofer Levin "Investments in any market drop at times of violence. This is particularly true in the case of the Israeli art market."

Photo by CANVA

Art Market Today

The future of art investments has been with us for quite a while now. Several websites are offering digital spaces for buying, selling, or bidding for works of art, and their share of the global art market is constantly growing. Thanks to lockdowns around the world part of the activity has been shifted to these platforms. Sotheby’s online sales, for example, more than quadrupled in 2020 and an impressive rise was registered in sales of other auction houses. Moreover, some digital platforms enable small scale investors to buy or sell shares that represent an investment in artwork.

"Today the gamut of possibilities for investing in art is quite vast, and there is room for all types of investors. Nevertheless, the same rules apply here as they do in any other investment asset: conduct a thorough study of the work of art, its authenticity, and the price range for similar works, and after you make the decision, have patience," concludes Ofer Levin.

Photo by CANVA
Photo by CANVA
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