CBS’s Cifuentes Presents Event on Investing in Art

October 08, 2019

Arturo Cifuentes, professor at Columbia Business School (CBS) and research associate at the Latin American Center for Economic and Social Policy CLAPES-UC, took an in-depth look at the art market from a financial viewpoint.

During the event titled “Pricing Beauty: Is it Risky to Invest in Art?” opened by Drina Rendic, President of National Museum of Women in the Arts-Chile and held end-September at the Patricia Ready art gallery in Santiago, Cifuentes expounded before a crowd of more than 120 on the creative and financial dimensions in the global art markets, in which more than US$ 65 billion was traded in 2018 compared to US$ 25 billion in 2003.

However art is illiquid with high transaction costs and should not be seen as a traditional investment, as there is no reliable or conventional pricing index, he noted, with different characteristics - sizes, colors, shape, and artist age - adding different values. As an example, Cifuentes pointed to two paintings by Rufino Tamayo, both sold in November 2016 and both featuring three slices of watermelon. The difference was that one, “Sandías y Naranja” also had an orange in it and it sold for US$ 2,295,500, while the other, “Sandías”, sold for US$ 2,167,500. In this case, the simple fact that one had an orange in it meant a difference of US$ 125,000.

If investors are comfortable with volatility, then purchasing art could be a good alternative to diversify, but a key question for any investor to ask is “Do I like it?”, he said.

Other points of interest:

  • The US purchases about 30% of the art sold, while the UK represents about 24% and China 19%.
  • Impressionists and modern art dominated in the 1980s and 1990s. However now it is contemporary and post-war art, which represented 46% of sales in 2017.
  • Sotheby’s and Christie’s account for more than 70% of the auction market.
  • There are more than 5,000 US art galleries but more than half collapse within 5 years.
  • 0.2% of artists sell for more than US$ 10 million and account for 1/3 of total sales.
  • The on-line market sold more than US$ 4 billion in 2018.