In a hasty attempt to pre-empt reality, financial blogger Felix Salmon uses his brand-new Reuters perch to declare the “Death of Art as an Asset Class.” This sweeping generalization is based upon this news that UBS is shuttering its art advisory business even as it continues the sponsorship of Art Basel that caused it so many recent legal headaches.
Here’s Salmon’s logic-leaping take on UBS:
UBS was always well placed to be the last man standing in the inevitable shakeout of art-advisory departments in investment banks. It had the most rich clients, and it invested by far the most money in pushing itself as the only bank which could manage both dollars and Diebenkorns. So this announcement is pretty shocking — but also a little heartening, to those of us who love art for its intrinsic rather than its monetary value.
How UBS’s decision would hearten those “who love art for its intrinsic” value, Salmon doesn’t explain. The idea of art as an asset class remains strong in the world. Take this valuable capsule history of the now-famous British Rail Pension Fund’s mid-1970s art-as-an-asset coup that pubished today on Emirates 24/7:
It may be helpful to examine the buying policies of first serious example of institutional investment in art, the British Rail Pension Fund. This provides an pertinent historical correlation with the financial climate of today as buying commenced in 1974, a year in which the FT Actuaries index [the main market indicator of stock market performance in the UK at the time] had fallen 70 per cent from the beginning of 1973 and in the Dow Jones 40 per cent. Between 1974-1980 the BRF invested £40 million (Dh210m) in art and by 1980 when it ceased acquisitions, it had acquired 2,400 works of art. It invested 18.8 per cent into Old Master paintings, 11.1 per cent into Old Master drawings, 10.2 per cent into Impressionist art, 10.2 per cent into Chinese works of art, 10 per cent into books and manuscripts, 8.3 per cent into antiquities, 6.9 per cent into Medieval and Renaissance works of art, and the remaining 24 per cent by value was spread over various categories including Old Master prints, 19th decorative art, furniture, English pictures, continental pictures and silver and vertu. Sales of the collection were held in 1980s and 1990s and by the end of 2000, it was estimated that the total income arising from the funds sales was £168m, creating a return of approximately 4 per cent in real terms after taking into account inflation. The top five performing sectors were Impressionist and Modern art, early Chinese ceramics, Chinese works of art, English silver and Continental silver.
The Death of Art as an Asset Class (Reuters)
The Right Art Investment Still a Stroke of Genius (Emirates 24/7)