Art Isn’t a Great Asset If You’re Simply Allocating

Ben Mandel is ine of the smartest economists who keeps an eye on the art market. Here he answers the all-too-common question, is art a good asset to buy? in an uncommon way:

“There’s going to be a sense in which you can make money by dealing art,” said Benjamin Mandel, economist at J.P. Morgan Asset Management.  “But if you were to buy a representative basket, that is a portfolio of artworks that is representative of the market as a whole, would that, in fact, be a good investment? Probably no.”

Over the last 200 years, the real returns on the average artwork has been 3-4 percent a year, Mandel said, about the same as risk-free government bonds. But the volatility can be far higher than equities and it doesn’t offer the diversity of a non-corrolated asset. Add to that it’s an illiquid market, yet without the liquidity premium that other private placements can carry.

is Art an Asset Class?