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Increased wealth creation has created a generation of HNWI intent on art investing. Jeff Rabin comments on new breed of Chinese investors.

Alchemy

According to Artvest Partners, an art advisory firm based in New York that publishes indexes tracking the performance of different art categories, the art fund universe is worth $1 billion, only a fraction of the sector when you consider that the global turnover in both private sales and at auction, according to the firm, was approximately $65 billion in 2011. Jeff Rabin, who co-founded Artvest with fellow Christie’s alumnus Michael Plummer, is currently establishing an art fund for a major institution. He believes investing in art through a fund is a good way to access the market, as long as you do your homework to avoid the pitfalls and conflicts of interest that can occur.

Wall Street Journal

The downside is that this influx of newly wealthy collectors is fueling risky speculation on art, leading to price swings and heavy trading volumes for younger artists like the eyeball painter, Ji Dachun, whose lasting significance is still uncertain. Art advisory firm Artvest says Chinese investors have recently started at least eight art funds, which buy artworks with the aim of reselling them at a profit later. There are only about 20 similar funds elsewhere in the world.

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Based on what we have seen in the most recent series of sales in the first two weeks of November, our bottom line is, despite the striking success, as well as new records in the Contemporary Art sector, the overall art market is more fragile than current headlines would indicate.

Fine art is certainly an important subset of the Chinese interest in status purchases, but the investment attributes of art are also main driver fueling the strong appeal amongst collectors.

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