Fine art investment strategies from expert Win Smathers
IN THIS BLOG, WIN SMATHERS, MANAGING DIRECTOR AT INVESTMENT FIRM, HUNTER ASSOCIATES, WILL EXPLORE ART AS AN INVESTMENT STRATEGY IN TERMS OF THE WORLD AS WE KNOW IT AND ANTICIPATE IT TO BE. WITH GLOBALIZATION AND SHIFTING IN THE FINANCIAL WORK FROM EXISTING POWERS TO EMERGING MARKETS, IT IS ALL THE MORE IMPORTANT, IN MY VIEW, TO SAFEGUARD ONE’S WORTH NOT ONLY WITH MORE TRADITIONAL INVESTMENT VEHICLES BUT ALSO WITH THOSE THAT ARE RELEVANT TO THE CURRENT ECONOMY AND TO OUR FUTURE WELL-BEING.
WHAT ARE THE CHARACTERISTICS OF FINE ART THAT ALLOW IT TO BE TREATED AS AN ALTERNATIVE INVESTMENT AND WHAT ARE YOUR RECOMMENDATIONS IN DEVELOPING APPROPRIATE INVESTMENT STRATEGIES INVOLVING FINE ART?
Fine art is a lagging asset more affected by long-term wealth creation and destruction and lacking the daily price volatility of traditional assets which change hands at levels determined by immediate facts and influences. I recommend that investors build diversified portfolios to reduce risk and improve returns. Dedicating a portion of your portfolio to alternatives is a sound and proven strategy. Institutional investors may have up to 40$ in non-traditional asset classes. I suggest individual investors allocate 5-10% to this space. Art would be a component for the right investor who has knowledge and access to what is worthy of collecting.
HOW DOES IT MEASURE UP TO OTHER ALTERNATIVE INVESTMENTS? HOW DOES IT COMPARE TO MORE CONVENTIONAL HOLDINGS AND DO YOU AND YOUR ASSOCIATES IN THE FIRM HAVE EXPERIENCE IN ASSISTING A CLIENT TO DEACCESSION WORKS EITHER AT AUCTION OR IN THE PRIVATE SECTOR?
As far as I’m aware, none of our advisers have direct experience advising clients in the acquisition or sale of art. Keep in mind we are in sleepy Pittsburgh, childhood home of Andy Warhol!
HAS THE REASON TO SELL BEEN TO TAILOR THE INVESTOR’S PORTFOLIO OR HAS A NEED ARISEN? SINCE ART OR REAL ESTATE OR ANY PHYSICAL ENTITY CAN NOT NECESSARILY BE READILY CONVERTED TO CASH, WHAT IS YOUR THINKING TERMS OF ADVISING YOUR CLIENTS’ ATTITUDES TOWARDS THEIR COLLECTIONS?
I can only speak to the alternatives we do have in our client accounts. Historically, the alternative sleeve is quiet money. Its purpose is to zig when the stock and bond markets zag. When we have liquidity needs, both anticipated and the surprise, we typically go to the most liquid areas of the portfolio first.We do have clients with valuable collections, one of whom recently died and his estate raised $10 million from the world’s foremost stamp collection of inverted centers. We certainly don’t dissuade our clients from pursuing their collecting passions. Our job is to make sure that their traditional portfolios can provide the income and wealth generation to give them the time and resources to follow their avocations.
AS THE WORLD ENTERS A NEW PHASE IN TERMS OF SCALE AND GLOBALIZATION, WE CERTAINLY TAKE THIS INTO CONSIDERATION IN TERMS OF INVESTMENT STRATEGY. HOW DO YOU THINK THAT ART AS AN ALTERNATIVE INVESTMENT FACTORS INTO THESE CHANGES?
In our firm, we are cognizant of the globalization trend affecting multiple asset classes. For example, we know a significant percentage of real estate purchased in Miami and New York since ’08 is from offshore investors. We clearly have the globalization trend in mind when constructing our portfolios with the traditional asset classes. At some point, we may have the sophistication to advise our clients on art as an asset class or, at least, we know a sharp dealer in New York to whom they should speak!
THANK YOU WIN- FOR ALL YOUR PROFESSIONAL GUIDANCE AND FOR BEING A WONDERFUL ADVISOR TO ME AND A FAN. YOU SIMPLIFY COMPLEX SUBJECTS FOR ME ALL THE TIME AND HAVE SHOWN THAT WONDERFUL ABILITY HERE IN THE BLOG AS WELL.
AS THE GLOBAL ART MARKET CONTINUES TO EXPLODE, SPECIALISTS WHO CAN MANAGE, INSTALL AND CONSERVE ART COLLECTIONS ARE IN INCREASING DEMAND. GERI THOMAS, A VETERAN IN THE MUSEUM WORLD AND HEADHUNTER/RECRUITMENT SPECIALIST IN THE ARTS HAS CREATED AN EXTRAORDINARY ACADEMIC PROGRAM IN CONJUNCTION WITH NEW YORK UNIVERSITY. NEXT WEEK, I HAVE THE PLEASURE AND PRIVILEGE OF INTRODUCING HER TO PROVIDE THE DETAILS OF THE ARTS MANAGEMENT PROGRAM AT NYU, A WONDERFUL ASPECT OF WORKING IN THE ART WORLD.
I WELCOME ANY AND ALL COMMENTS AND QUESTIONS ON THIS OR OTHER ART-RELATED AREAS OF CONCERN. FIRE AWAY!
THANKS FOR YOUR SUPPORT.