It’s always hard to tell what quote really means when it is used by a reporter in a story. For example, CNN claims “Memories of the recession may be driving the rise in art prices.” In that, they’re quoting a brief comment from Hoffman about the trauma of asset prices collapsing during the credit crisis in 2009. But then the story starts to resemble something more like overheard conversational snippets that may or may not be directly connected:
Adding to the demand is the fact that paintings represent moveable assets in a world where security is not always assured, noted Hoffman, who said his group represents “probably 18 of the world’s top 1,000 billionaires.”
“In the case of a war, they could ship it from Lebanon to Geneva in two hours,” he said.
And some people from foreign countries may collect art because they want to keep low-maintenance assets outside their country that they think will appreciate in value.
The market is significant, with annual global volume estimated at $60 billion, he said. The investable part of that market — which he defined as pieces worth more than $1 million — represents $15 billion to $20 billion, with about half of that sold by auction houses and the rest by galleries, Hoffman said.
The whole may not be coherent but the individual comments are interesting. Is Hoffman saying that 18 billionaires are investors in his fund? Or is he referring to other services since the comments suggest these are owners of art, not investors in an art fund.
Also, with the investible threshold lying at $1m on the lower bound, what is the upper bound for investible art? In other words, at what price does a work become part of the trophy or masterpiece market where any upside will take years to be realized?