Art Investment in India for Dummies
Do you know that Art is the asset class? Owning an art is just like owning other assets like stocks, bonds, gold, Mutual funds, businesses, intellectual properties, web properties …etc..?
Well, yes. Art is not just the hobby anymore but it’s now the asset class in which investors invest for the huge capital gains. The Indian Art gives the 20-40% compounded annual return in the long run.
Indian art market is still in the nascent stage. In year 2004 it was just Rs.50 Crore market but today it is hundreds of crores of market. Here are the two possible ways by which you can invest in the Indian Art.
01) Direct Art Investment -
Here you buy an art from your money. You can buy a piece of art from eBay online or you can simply buy it from the art gallery or from the auction houses. Almost all the metro cities of India have several art galleries from which you can buy the art of your choice for the investment purpose. However, the main limitation of direct art investing is that, you MUST be expert in analyzing and valuing the art otherwise you will end up overpaying the art.
Most of the people have little to no knowledge about the art and that’s why they overpay for the art. And unfortunately, there are lots of scams in this market because the Indian art market is highly unregulated. So if you are an art expert than and only invest in art directly.
However, you can anytime hire some art expert or even an artist for helping you to take informed decision to buy the quality art at fair valuation.
02) Art Funds -
Art funds in India is the new concept. They are just like the traditional mutual funds. The only difference is that, here the underlying asset is an art. The fund manager of your art fund will invest your money on behalf of you to build the art portfolio and after 5 years or on maturity, your art fund will sell its art folio via auctions or directly to the other investors and distribute the profits among the investors.
This is the most convenient way to invest in the Indian art. Following 4 are the good art funds in India.
01) Copal Art
02) Edelweiss Securities
03) Crayon Capital
04) Osian’s Connoisseurs Art - (Also Read from Forbes India: Osian’s Art Fund – The Broken Paddle)
The only problem with the art funds is that, they have higher minimum investment amount. If you want to invest in any of the above art funds than the minimum entry price is Rs.10-15 lakhs. So this is a little bit costly for the average investors.
The another problem with art funds is that, we don’t have any proper valuation method for the art and that’s why sometimes the fund manager of your art fund may end up buying art at over priced value (However, these art fund managers are expert so chances of doing this are very less).
Another great problem with art funds is liquidity issue. You can not redeem your investments before its maturity and on maturity also, suppose if art fund fails to sell its portfolio, you will incur a loss.
Another great problem with art funds is – their NAV. I mean the Indian art market is so small that and we don’t have any worldwide acceptable valuation method for the art so what happens is – it’s next to impossible to determine the exact price of NAV of any art fund. Suppose if the NAV of some Art fund is Rs.135 per unit than what is the basis for this NAV? The art fund managers do valuations of their art on their own assumptions and past sales in the same segment of the art. And that’s why this method of calculating art funds NAV is not very accurate.
Thus, Indian art is a great asset class. But the only problem is that, you will need the expertise to invest in art funds as well as we need the proper valuation system for doing valuation of the art.