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High-End Art Poses Possibility for Investors

By Joe Mont01/03/11 - 08:00 AM EST

 

BOSTON (TheStreet) -- Despite the economic volatility of the past couple of years, the art market continues to set records.

Back in November, hedge-fund billionaire Steven Cohen bought Andy Warhol's 1962 painting Coca-Cola for $35.4 million at auction. Another Warhol, at a seperate auction lasy year, Men in Her Life, a black-and-white silkscreen depicting Liz Taylor and Debbie Reynolds, sold for more than $63 million. Overall, the modern pop artist is poised to join the ranks of Monet and Picasso in terms of appraisals and sales.

Andy Warhol is poised to join the ranks of Monet and Picasso in terms of appraisals and sales, just as some are looking at high-end art as a securitizable commodity.

Given the massive inflows and outflows of art collectors, is artwork ready to take the leap from hobby to commodity, from private equity to mutual funds? A small but growing movement is seeking the securitization of the high-end market, following the lead of Russia and India.

Working against such a development is an unregulated marketplace that is often more Wild West than Wall Street. The art world can be a shady place, full of backroom deals, insider trades, subjective pricing, theft and forgery. Whim, rather than economics, guides much of business dealings.

Sergey Skaterschikov, however, is among those who thinks art can thrive as a formalized asset class.

Skaterschikov is founder of Skate's Art Market Research, which provides investment research on the world's most valuable art and art industry companies. Skate's Top 5000 is a database and index of the world's 5,000 most valuable artworks based on publicly reported auction prices.

He says the auction season this fall confirmed that the art market is "clearly emerging as a strong alternative investment market" and that "the masterpieces segment alone in Skate's Top 5000 absorbed about $700 million in net capital inflows for the three-month period against the backdrop of currency fluctuations, European Union woes and overall global economic uncertainty."

The total volume of trading in Skate's Top 5000 art stood at $3.63 billion as last year drew to a close, roughly $6.1 billion per work of art.

At a forum last month in Miami, Skaterschikov was among those discussing whether there will soon be a new trend of institutional investment capital allocated to art as an alternative asset class.