Fine art - the new stocks and bonds

A new trend has been gaining prestige among wealthy investors who want to diversify beyond stocks and bonds: the fine art investment fund.

The process consists in acquiring and then re-selling top of the art pieces for profit gain.

The most visible consequence is that international art sales struck a new record last year with sales worth $66 billion.

‘People are looking at new areas to invest in, and at the moment art is one of those -- it's making people money,’ said Jon Reade, co-founder of Art Futures Group art brokerage.

A fund manager might buy works he thinks are undervalued, or come from emerging artists, or are signed by top artists.

The next step is trying to predict when a particular work of art will reach the top of its value by monitoring a set of markers from auction houses, curators, galleries which can shed some light over the ongoing trends.

Such art investment funds require a spicy price tag per investor. For example, London’s Fine Art Fund Group is asking for a minimum investment of $500,000 to $1 million for each investor.

Even though this trend is new, with assets worth $2 billion world-wide as compared to the $2.6 trillion hedge fund industry, related businesses have already caught the news and are jumping to get a piece of the pie while it’s fresh. Such a business is a freeport: a secure tax-free place where one could deposit fine art and other luxury objects.

China is expected to have the highest demand of fine art, giving that Asian demand brought a 69 percent increase to the global art fund market in 2012.

However, an investor has to be aware of the risks he undertakes when investing in art, as the lack of regulations and the opaque nature of the market make one of the riskiest investment options.

On the more optimistic side, investing in art comes with its perks: ‘You get the benefit of a beautiful work of art you can enjoy on your wall. It's also an asset that is appreciating in value, because it's a market that's so strong,’ says Diana Wierbicki, who specializes in art law at Withers.