In Geneva, Sages Gather to Discuss Art as an Asset

Nicholas O’Donnell went to Geneva to attend the second in a series of conferences on art as an asset. This one was held at the University of Geneva and had serious participants in the field:

Luc Thévenoz chaired the first session, “Art as a common asset class?”  This is an interesting question I’ve discussed myself with many private wealth advisors.  Art is obvious an asset, with significant value.  Perspectives vary widely on how to treat it as part of someone’s overall portfolio, yet this is a question that needs to be addressed; after all, if nothing else art in your estate will most certainly be considered an asset for taxes.  Does art produce income?  Should it?  No different than real estate, leveraging can create income even in a low-interest environment.  Or in another sense, perhaps its illiquidity makes art more like commodities like gold.  On the other hand, investors don’t hang marketable securities in their living room or create museums to house them.  No one would say art market is financial market, but can investors approach art as investment? […]

Jan Prasens of Sotheby’s Financial Services discussed their work in finance and art.  His job, as he put it, was to control the downside.  Art has been collateral for centuries, but only in the last 20-30 years has it become a more developed and professional marketplace. Sotheby’s started only 1988, but was still one of the first. Prasens point out that market data are hard to come by, but transparency is increasing.  Estimates of approximately $60 billion underscore that art pales in proportion to other assets being financed.  Contemporary art has been a game changer, prices are going up, but so is liquidity.  Challenges are marking to market, title and World War II restitution claims, and possession.  Whereas the U.C.C. allows the borrower to retain possession, that is not true everywhere.

Finance, Art and Law—How Does Fine Art Shape Up as an Asset? (The Art Law Report)