Internews: The Financial Market Vs. The Art Market

At first sight, the financial and the art markets don't seem to have much in common. The first is a very pragmatic and down-to-earth field animated by mathematical models and short term speculation, whereas the second relies on passion or feelings animated by art lovers who more often follow their gut rather than decide by empirical evidence.

However, the art market counts a growing number of art dealers who come from the financial industry and manage to deal with these two antagonistic fields in concert. Fréderic Sioufi, the Parisian 18th and 19th Centuries furniture and works of art dealer, worked for 15 years as a financial trader in Paris and Tokyo. Christophe Hioco, an expert and dealer in Indian Hinduist and Buddhist statuary, spent 27 years working with the prestigious business bank JP Morgan with which he still maintains close relations.

We, at Artfinding, believe that the financial and the art markets have much more in common than one could think.

First of all, many of the major art collectors are financiers: Vladimir Lopukhin (Russian Business Banker), Bonko Chan (Vice-President of China Assets), Ignacio Liprandi (Vice-President of Merill Lynch Argentina), Richard Kramlich (CEO of an investment company), Jean Bonna (Banker), Petr Aven (President of Alfa Bank)... to cite a few. So people can work in the financial industry and still have a strong interest in the arts.

The recent burst of the contemporary art market bubble have revealed the hidden tip of the iceberg: speculation. This dynamic consists in purchasing risky investments that present the possibility of large profits. The financial market is driven by speculation. Similarly, ever since the 80's, many art "collectors" have literally invested in several fields of contemporary art - which is much more volatile than ancient art - in order to make profits. But in 2009, the global crisis has broken the chain and without new buyers, prices of contemporary art have dropped anywhere from 20% to 50%. As Mr Sioufi admits, “lots of wealth managers advise their clients to diversify their risks by investing 1% to 5% of their assets in the art market, mostly in the contemporary art market". So all together 5% of these assets present a huge amount of money, which creates without fail a speculative bubble. On the other hand "antique arts are less speculative and a safer investment", agree Christophe Hioco and Fréderic Sioufi. In a nutshell speculation certainly is a key feature that the financial and the art markets share in common.

Last but not least, a growing number of people are starting to apply financial & mathematical models to the art market. “As a trader, I am familiar with the financial dynamics and I often apply them to my art business. For example, as I ask myself whether a particular piece might be a good investment in the future, I often look at the recent performance of similar pieces as a strong indicator”, says Christophe Hioco. As most antique dealers don't usually consider art as an investment, the strategy used by Mr. Hioco seems to be the one to follow: in 2009, in the middle of the global financial crisis, Mr Hioco's company's (which has two activities of financial advising and art trading) profit increase was 40% in one year!

The art market deals with billions of dollars each year, fluctuations in trends can offer great business opportunities, ... and many other reasons will encourage a number of financial players to get more and more involved in the art market. One single rule needs to be followed if one wishes to invest in art, in addition to clever advice by an art market specialist, the first buying motivation of a work of art should be passion. Investing in what you love is a safe value guarantee.

Frederic Sioufi and Nidal Sioufi	Christophe Hioco

Fréderic Sioufi (Galerie Atena)
2 place du Palais Royal
75001 Paris - France
Tel: +33 (0)1 42 61 79 72
http://www.galerie-atena.com

Christophe Hioco (Galerie Hioco)
12, rue de Penthièvre
75008 PARIS - France
Tel : +33 1 53 30 09 65
http://www.galeriehioco.com

Comments

• Maggylo (2010-11-30) Report to moderator There is no difference between these two markets. The only thing is that the art and antiques market follows the fluctuations of the global financial market. A close look to both trends since 20 years will clearly show that they are similar with a little time lag since the art and antiques market is less reactive. The art market is ruled buy money, so the art and antiques market trends are similar to the financial market trends, but the financial market trends aren't necessarily similar to the art and antiques market trends. There is no difference between these two markets. The only thing is that the art and antiques market follows the fluctuations of the global financial market. A close look to both trends since 20 years will clearly show that they are similar with a little time lag since the art and antiques market is less reactive. The art market is ruled buy money, so the art and antiques market trends are similar to the financial market trends, but the financial market trends aren't necessarily similar to the art and antiques market trends.
• Francis Magne (2010-11-24) Report to moderator Je ne pense pas que les collectionneurs cités ici soient de réels amateurs d'art. Si ce sont des financiers, ils faut se dire qu'ils ont des fortunes à dépenser et qu'après avoir acheté tout ce qui pouvait être superflu et matériel, ils se tournent vers la culture. Rien de plus facile que d'acheter un beau tableau pour s'acheter une culture et briller aux yeux de ses invités. Doc je pense que s'ils achètent de l'art c'est surtout par intérêt social et financier, plus que par goût artistique. Je ne pense pas que les collectionneurs cités ici soient de réels amateurs d'art. Si ce sont des financiers, ils faut se dire qu'ils ont des fortunes à dépenser et qu'après avoir acheté tout ce qui pouvait être superflu et matériel, ils se tournent vers la culture. Rien de plus facile que d'acheter un beau tableau pour s'acheter une culture et briller aux yeux de ses invités. Doc je pense que s'ils achètent de l'art c'est surtout par intérêt social et financier, plus que par goût artistique.
• art-finder95 (2010-11-23) Report to moderator I wonder how Christophe Hioco can say if anything could be a safe investment by comparing recent performances of similar pieces. Everyone knows that in the art market past performances is not a guarantee or predictor of future results. If no one is able to predict the stock market - which has much more mathematical bases than the art market - how could anyone predict an artwork's price? The Artprice so called 'indicator' shows for each signed artwork the prices it would have reached in the past according to the today's price and the past artist's auction results. I made a few tests with paintings which have been sold in auction several times, I can tell the tolerance threshold is over 30%. Who would follow an advice with such a margin of error? I wonder how Christophe Hioco can say if anything could be a safe investment by comparing recent performances of similar pieces. Everyone knows that in the art market past performances is not a guarantee or predictor of future results. If no one is able to predict the stock market - which has much more mathematical bases than the art market - how could anyone predict an artwork's price? The Artprice so called 'indicator' shows for each signed artwork the prices it would have reached in the past according to the today's price and the past artist's auction results. I made a few tests with paintings which have been sold in auction several times, I can tell the tolerance threshold is over 30%. Who would follow an advice with such a margin of error?
• James.thoss@hotmail.com (2010-11-23) Report to moderator Another common point between the financial market and the art market is that in the long term, these two markets are as good/bad investments. I am here talking about the general art market mixing both antique and modern art. The Mei Moses index of fine art studies the historical performance of art as an investment and asset class based on auction transactions. On a 20 years basis, we can see that both of these markets show the same result: 50% between 1990 and 2010. The difference is that in 20 years I can sit on my lovely art deco armchair, and hardly on my stocks. Another common point between the financial market and the art market is that in the long term, these two markets are as good/bad investments. I am here talking about the general art market mixing both antique and modern art. The Mei Moses index of fine art studies the historical performance of art as an investment and asset class based on auction transactions. On a 20 years basis, we can see that both of these markets show the same result: 50% between 1990 and 2010. The difference is that in 20 years I can sit on my lovely art deco armchair, and hardly on my stocks.

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