Art Market Monitor

Global Coverage ~ Unique Analysis

  • AMMpro
  • AMM Fantasy Collecting Game
  • Podcast
  • Contact Us

Most Successful Art Fund Trailed Inflation

January 26, 2011 by Marion Maneker

Ivan Lindsay gives an excellent history lesson on art as an investment on Spear’s Wealth Management. He tells succinctly the famous story of the British Rail Pension Fund and puts it in context:

Although modern art funds come out with a bewildering array of figures, the only pension fund which has made a serious foray into the art market and published figures was the British Rail Pension Fund, which invested around £40 million in art, or around 3 per cent of its holdings, from 1974 via Sotheby’s, which gave free advice as long as the acquisitions and sales went through it. The fund acquired a collection of 2,400 pieces, including Chinese porcelains, African tribal art, Old Master and Impressionist paintings, Limoges enamels, and gold and silver objects. When it sold these objects between 1987 and 1999 the portfolio wound up with an annual compound return of 11.3 per cent, but the gains came primarily from 25 Impressionist paintings, showing the importance of a diversified art collection from an investment viewpoint.

The pension fund’s investment was made against the backdrop of 17 per cent 1970s inflation and had three distinct advantages over modern ‘art funds’ in that it had unlimited funds so it could afford the best items, access to the entire market (albeit through Sotheby’s) and unlimited time to hold the objects. The conclusion many drew was that art proves successful as an investment only if held for the long term. Maintenance and transaction costs are simply too high for it to be a short-term investment.

So, in answer to the original question of whether art is a genuine hedge against inflation, the answer would appear to be a qualified yes, in some cases, and only when buying with the knowledge of someone on the inside. In some decades it outstrips stocks and bonds and generally exceeds inflation. It normally outshines gold, although probably not in the past decade, when gold moved from $200 an ounce in 2000 to over $1,300 in 2010.

Go Figure (Spear’s Wealth Management Survey)

More from Art Market Monitor

  • Foundation BrantFoundation Brant
  • Christie’s to Auction $8M. Picasso Alter-Ego Minotaur and Muse Scene in Global ONE AuctionChristie’s to Auction $8M. Picasso Alter-Ego Minotaur and Muse Scene in Global ONE Auction
  • Gaitonde Estimated at $2m Leads Sotheby’s March SaleGaitonde Estimated at $2m Leads Sotheby’s March Sale
  • Lowry's Steady RiseLowry's Steady Rise
  • Cool Indian Art for Hot British SummerCool Indian Art for Hot British Summer
  • Sotheby’s Chinese Works of Art Sales See Signs of Renewed Bidding FrenziesSotheby’s Chinese Works of Art Sales See Signs of Renewed Bidding Frenzies

Filed Under: Art Funds

About Marion Maneker

LiveArt

Want to get Art Market Monitor‘s posts sent to you in our email? Sign up below by clicking on the Subscribe button.

  • About Us/ Contact
  • Podcast
  • AMMpro
  • Newsletter
  • FAQ

twitterfacebooksoundcloud
Privacy Policy
Terms & Conditions
California Privacy Rights
Do Not Sell My Personal Information
Advertise on Art Market Monitor