The art of wise investing

Castlestone Management anticipates a 40% rise in art prices over the next 24 months, as the art market continues to pick up from recent lows seen in Q2 2009.

 

Castlestone’s views are supported by its global macro research and fundamental analysis. The equities rally not only shows signs of improved market sentiment but also highlights an upward trend as equity prices are up by 70% from the collapse suffered in Q4 2008.

Equities is considered to be a key indicator when analysing trends in the art markets, as further research shows, art lags equities by six to 18 months, as noted by the Mei Moses All Art Index (www.artasanasset.com); hence improved equity market conditions prove a favourable investment outlook in art investments.

Gold, also a key indicator, not only tracks wealth but like art is an unleveraged, irreplaceable real asset, which investors turn to as a safe haven in times of uncertainty. Gold has appreciated by 50% since its decline in November 2008, where prices were barely reaching the $700 levels.

Art offers investors the opportunity to diversify their portfolios away from traditional asset classes and the recent recovery has therefore increased sales volume. At the February Sotheby’s and Christie’s Impressionist & Modern and Contemporary Art auctions, sales were up by 153% in comparison with 2009 when markets where in sharp reversals.

The Art Market Confidence index has also reported a rise of 29.3%, to a six-week high, in line with the S&P 500 up by 5.15% in March. Castlestone expects prices to continue appreciating before consolidating in 2011.

Castlestone Management is looking forward to highlighting positive returns for the Q1 2010, as the Collection of Modern Art Fund continues to benefit from the art market’s upturn in line with the AMR Post-War Art 50 Index which rose 1.88% in February.

Angus Murray, chief executive of Castlestone Management, refers to art as “an irreplaceable, unleveraged, real asset which responds well in a time when the possibility of inflation is on the horizon alongside the rapid decline of the real purchasing power of money. When the value of money falls, the value of assets rise, whether its art or gold."

The number of bidders at Sotheby’s New York Impressionist & Modern and Contemporary Art Evening auctions was up by 85% from Spring 2009 to Autumn 2009 as well as up 18% from the height of the art market boom in 2007 to Autumn 2009.  In February 2010,  Alberto Giacommetti’s “Walking Man I” sold for £65m, the highest price ever paid at auction and Yves Klein’s “Ant 5” sold for £4 million, nearly £3 million above its high estimate, manoeuvring the market of Yves Klein to a different level.

Wedbush’s upgrading of Sotheby’s stock from neutral to outperform further manifests the positive sentiment towards the art market recovery: “Improved global equity, commodity, and other financial markets have continued to drive up global wealth in recent months, hence the demand for art”. Christie’s deputy chairman, Amy Cappellazzo, was quoted as saying “Art is a safe bet for cash right now”.
 



* reprinted by permission from International Advisor, April 12, 2010; written by Angus Murray