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Portfolio > ETFs > Broad Market

To Profit in Art Market, Know Your Niches

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While equities were strong across the board last year, the same was not true of the art market.

Artistic works produced after World War II and in the current era saw their values rise about 10.60% on average, while traditional Chinese works of art increased by 12.50% in 2013, according to Mike Moses, co-founder of Beautiful Asset Advisors in New York and co-developer of the Mei Moses Fine Art Indexes.

“In general, traditional Chinese works of art have been the strongest category in the last 10 years and Post-War and contemporary has been the strongest category in the last 25 years,” said Moses, in an interview with ThinkAdvisor.

His firm’s All Art Index turned in an overall return of 2.30% for 2013. “It went up a tiny little bit but it was basically in negative territory almost the entire year and then eked out a small gain based on the November and December sales,” Moses explained.

The Mei Moses art indexes are unique in that they are based on a proprietary database of repeat sale pairs created from transactions in the United States art auction market, principally the New York auction houses.  They track transactions for specific art objects over time.

When an item comes back on the market and is sold to a new buyer, the firm updates its database with the new information. That data then feeds into their average compound-annual-return calculations for the seller’s holding period and each art category.

Works in the Old Master art category generated an average loss of 14.20% in 2013, and Latin American paintings saw their sales values decline 15.70%.

“Old Masters has been the weakest category for many years, so [last year] isn’t that much different,” Moses said. “What continues to be somewhat unusual is that the high-end works, the trophy purchases, tend to get all the headlines, but the majority of the market is sort of well below that.”

The trophy works are only “trophies” because of the high prices they command at certain times, he notes. “Our studies have always shown that masterpieces tend to underperform the market.”

Local/Regional Investments

The term “art market” is misleading, experts say, because it actually is composed of sub-markets and niches.

The wide range of price changes in these niches, such as the markets for particular painters or schools, illustrates how segment of the market can vary dramatically at any given time.

Work by Guy Higgins, a popular artist known for his paintings of New York snow scenes, for instance, had his heyday in the mid-2000s, according to Ed Jaster, senior vice president of fine art with Heritage Auctions in Dallas.

About 10 years ago, Higgins’ paintings commanded high prices, and some still do today, says Jaster. For example, an early work from the 1920s with a popular subject matter might sell for $200,000 to $300,000.

Some of other Higgins’ paintings, however, have lost considerable value. “Paintings that were selling for $80,000 and came to the market with great regularity, those are probably down closer to the $40,000 and $50,000 level” now, Jaster said.

Regional works by other popular artists may be going up in value today, he points out.

Heritage Auctions recently sold several paintings by Julian Onderdonk, a Texan Impressionist painter. One went for $515,000, a record for the artist. Another piece fetched $317,000, and a third got $286,000.

Interest also has been strong for the works by painter John McCrady, a native of Mississippi.

“He’s specifically known in the South and kind of has a moniker as being a Louisiana artist,” Jaster said. “We’ve sold one of his paintings for $542,500 and that’s also a very strong and new record for the artist.”


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