How does art funding work? essay sample

 

 

Art funding is a potent investment which helps the promotion of the works of arts. Art market needs investments just as any other market do. It usually lacks regulations, clear prices, and objective value of fine arts. To benefit from these aspects of the art market, art funds’ investors work side by side with experienced art professionals and charge fees from the conventional “buy and hold” mechanism. Opponents of art funding take it as an exceptional arbitrage opportunity while their opponents admit that the investment of art is a risky business which can drag unpredicted losses for the investors.

Most art funds work under the guidance of companies engaged in the professional investment management. Art market professionals and investment advisors perform a wide range of tasks besides just buying and selling pieces of arts. They identify potential investors and present the portfolio of the fund during exhibitions. Companies manage storing and insuring of the art as well as relations with their investors. Art fund managers usually have their own capital invested in the arts they operate with so that they have the same interests with other investors in the business. The fees charged by art funds depend on their performance. A performance fee makes up 20 percent of profits from the disposition of fund’s portfolio.

Recently, the number of art funds has visibly increased. The investors recognize that the art market is growing and benefits from price appreciation, unlike the investments in stocks and bonds, rapidly increase. Art funds’ returns do not correlate with the traditional stock or bond investments which helps to diversify risks of investment. The lack of regulation of the art market provides exceptional opportunities for the investors to benefit from the business.

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