Pros and Cons of Art Funds

Art funds are the new investment vehicles in India. And since 2004, few Indian firms have launched their own art funds. Art has emerged as a new asset class. And that’s why it is very important to understand the pros and cons of this new asset class.

First of all, Read the Basics of Art Funds in India: Art Funds in India Review

Advantages (Pros) of Investing in Art Funds -

- The main advantage of investing in Art is – Diversification of your wealth. If you have already diversified your wealth among the traditional asset classes such as stocks, bonds, gold and real estate than it’s time to go for Art Investments.

- The Indian Art market has given 30-40% compounded annual returns in the past.

- Art funds provide you a professional management of your money. Your money is being invested by the professional art managers and thus, you can get maximum returns on your investments.

- Even if you don’t have expertise to invest in art, you can invest in art via art funds just like stock mutual funds.

Disadvantages (Cons) of Investing in Art Funds -

- The main limitation of investing in art is – The lack of proper valuation system for the art.

- Another disadvantage is small sized Indian art market.

- The art market in India is highly un regulated and lack of SEBI regulations.

- According to Forbes India, Osian’s Art fund of India is the biggest flop show because of several reasons. One reason was that, the fund manager of this fund Tuli has bought the art which was he thought that will be valuable in the future. But that day never come. This is the main limitation of investing in Art. Because of the lack of proper valuation methods, it is really unpredictable to do proper valuation of the art.

My Opinion -

In my opinion, you should only go for Art funds if your over all portfolio net worth is well above Rs.1 crore and you should never invest more than 10% of your total portfolio net worth in the art. Just follow this simple rule before investing in any art fund.

Remember that, Businesses (Stocks) are always more predictable in valuations than the art. So always give first priority to the equity.