On April 4, Dr. Roman Kräussl, Visiting Fellow at the Hoover Institution at Stanford University and Professor of Art-Finance at the University of Luxembourg gave a standing room-only talk at The Battery on the True Value of Art. Kräussl studied Economics at the University of Bielefeld and got his PhD in Financial Economics at the Center for Financial Studies (CFS) at Goethe-University, Frankfurt/Main, before beginning to focus on alternative investments.
Through this research, Kräussl became interested in art as an alternative form of investment, which he writes frequently about, both for his website www.art-finance.com, as well as for a number of publications. At The Battery, Kräussl spoke with guests about how to approach investing in art. Noting the economic turmoil that surrounded the 2008 crash, Kräussl discussed how the art market suffered considerably less than more traditional markets, like real estate and stock. Fast forwarding to 2018, any possible dip in the art market has more than corrected; the art market is booming, with art prices surging and attendance at art fairs and events skyrocketing.
In thinking about collecting art, Kräussl notes that collectors are more frequently seeing it as an investment -- which is also encouraging a much wider swath of the population to think about collecting art. As he pointed out, there could be many benefits to art as an alternative form of investment, including no dramatic daily shift in prices thanks to there being no ‘opening’ or ‘closing’ of the daily art market, room for personal taste, and the fact that each artwork is unique.
Of course, in thinking about investing, historical data is also an important factor. In looking at art as a long-term investment from 1970 to 2017, Kräussl found that art performed just below the S&P 500 on average, but well above real estate. Nonetheless, investing in art comes with its own set of challenges, including storage, damage, changing tastes, and the potential for collecting fakes. Yet it also comes with advantages that cannot be found in the stock market, including aesthetic pleasure, prestige, and the opportunity to live with a work that you LOVE. Ultimately, investing in art -- like any investment -- is not foolproof, but if you buy what you love, you are at least guaranteed to enjoy your investment on a daily basis.