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By Liza Horvath


Art as an Investment


After 165 years, the venerable commercial art gallery Knoedler & Company of New York closed their doors. It turns out that in 2007 Pierre Lagrange bought a Jackson Pollock painting – what Lagrange believed was an original Pollock – for $17 million. In subsequent forensic testing the painting was found to be a forgery and, in 2011, Lagrange filed a lawsuit against Knoedler – ostensibly forcing the long-standing gallery out of business.   


Lagrange is a London-based hedge fund manager who sees art as a way to diversify investment risk. Abundantly more interesting and hugely more risky, the “alternative” investment market of luxury items such as classic cars, rare coins, stamps, jewelry, wine and antique furniture is booming. According to the Knight Frank index on Luxury Investments (KFLI), in the decade that ended in the second quarter of 2013, the price of classic cars rose by 430 percent, rare stamps by 255 percent and coins by 55 percent – all in a market where getting a 10 percent annual return in a stock and bond portfolio is cause for celebration. Can you see the allure?


No doubt that your investments in jewelry, paintings and wine are more interesting cocktail party talk than the price to earnings ratios on common stock, but is art investing really worth considering? Well, consider this: if you buy a limited print Brett Weston photograph, you have the pleasure of enjoying it while you own it and, over time, the print will most likely appreciate in value.


There are, however, certain risks to consider when looking at collectibles for return on investment. Art, wine and other luxury items go in and out of taste which means if you suddenly need cash and your Weston photograph happens to be out of favor, you may need to hold on to it hoping for an uptick in market interest. The upticks could be few and far between meaning your Weston investment may remain illiquid for a long time.


Melanie Gerlis, in her book “Art as an Investment? A Survey of Comparative Assets,” makes a point that art markets are somewhat opaque and the prices set by dealers who may have their own agendas for promoting certain artists or in marketing specific pieces. Gerlis’ position brings us back to Lagrange’s “Pollock.” Whether you are considering investing in a painting, classic car, wine or other collectible, it is important to seek an objective consultation from a professional who can advise you on the condition, fair market value, authenticity and quality of your proposed acquisition. Even then, you may want to consider two independent appraisals - in 2013 Christian Parisot, president of the Modigliani Institute in Rome, was arrested for allegedly knowingly authenticating forged works – and he was a respected authority.


Alternative investments into collectibles can be fun and there is certainly money to be made. In 2013 a 1,000-year-old Chinese bowl, purchased at a garage sale for $3, was sold at a Sotheby’s auction for $2.2 million. It can be fun and you may get lucky, but keep in mind that the risk is high so only “invest” in collectibles funds that can be tied up for what may be a long time and seek advice from experts with no hidden agendas.

Liza Horvath has over 30 years experience in the estate planning and trust fields and is the president of Monterey Trust Management, a financial and trust management company. This is not intended to be legal or tax advice. If you have a questions call (831)646-5262 or email liza@montereytrust.com










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