Modern Art Investment

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The market for Post-War and Contemporary art saw dramatic growth between 2003 and 2007 with valuations rising by eightfold. However, the recent financial crisis put a sharp stop to this growth, and from their peak in 2007, art prices fell by around 30-40% during the last quarter of 2008. One year on, the art market has settled somewhat and with confidence returning, sellers are again happy to release pieces to the market. With prices still well below their 2007 highs, there are plenty of attractive buying opportunities for the well-advised collector or financial investor. There is always a market for the right masterpiece at the right price. This was demonstrated by the record result achieved for Andy Warhol’s ‘200 Dollar Bills’ which sold in NY in November for $43.7 million, more than triple its highest estimate.

BaconAngus Murray, Chief Executive of Castlestone Management, a company offering specialised art funds to investors, commented, “Art auction prices tend to lag equity prices by about 6 to 18 months and since equities have been on a record breaking run in late 2009, we are really optimistic about art continuing its recovery in 2010. Inflationary pressures are also building. The stimulus package has driven global money supply up by 40% over the last 12 months leading to strong fears about the inflation prospects for 2010. Historically real assets, including art, have consistently outperformed financial assets and have frequently been used by investors as a hedge against inflation. This fear of inflation is likely to give impetus to prices in the art market as it has already done for gold – and we have seen the gold price rally spectacularly in 2009. We believe 2010 will see a corresponding rise in art valuations.”

In recent years, Post-War art from established artists who are either deceased or non-producing has proven to be the most reliable part of the market. Prices in this area are steadily increasing as the limited supply of quality pieces on offer is combined with a growing demand from collectors, museums and investors. Constanze Kubern, Senior Art Adviser at Castlestone commented, “The recent NY sales saw a record number of bidders tempted by the superb quality and attractive prices of the pieces on offer – the results realised were correspondingly high. The next buying opportunities are the London auctions in early February. With combined sales volumes up 68% compared to the same events last year, it clearly shows sellers’ confidence has returned. We look forward to the auctions both as a buying opportunity for the Fund but also to help us determine the speed of recovery we are likely to see in the art market.”

Castlestone’s Collection of Modern Art Fund provides access to a well-diversified portfolio of museum-quality art for as little as £10,000. Further information on the Collection of Modern Art Fund can be found at their website: www.collectionofmodernart.com.

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