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Book Review
Fine Art and High Finance
The art boom in the nineties and early part of the new millennium witnessed staggering growth, especially in contemporary art segment. So it’s hardly surprising that a piece of art is being commoditized increasingly, getting packaged into luring funds and projected as an attractive alternative asset class. Of course, there is now greater awareness of the current art trends.

However, even though most of us can recognize a Husain or a Raza, Picasso or a Warhol at 10 paces, not many will have grasping of the more complex aspects that are crucial to investing in art - something most often than not heterogeneous, in a market which is not fully regulated. ‘Fine Art and High Finance: Expert Advice on the Economics of Ownership’ (Edited by Clare McAndrew; Publisher: Bloomberg Press; Price: $39.95; Pages: 336) looks to fill in the knowledge gaps. It deals with the various finer elements of art investment and the factors that affect it – specific and generic, broader and individual issues - that come into play.

A cultural economist and investment analyst by profession, she is considered a leading expert on the highly specialized subject of economics of art ownership. She holds a PhD degree (economics) from Trinity College, Dublin, where she later taught economics for a few years before leading several research projects for the UK Arts Council, apart from conducting detailed studies on the aftereffects of regulation and taxation on the art market. After a brief association with Kusin & Company (specializing in visual arts investment), in 2005 she came back to Europe, and pursued her research before conceptualizing Arts Economics in Dublin. The institution works with a solid network of academic researchers and private consultants in offering research & consulting services to the art trade and wider financial sector globally.

Clare McAndrew’s ‘The Art Economy’ (2007) acted as a guide to the visual art market for aspiring investor. Taking a cue from it, ‘Fine Art and High Finance’ further updates and elaborates on the key topics covered in the earlier volume. Spelling out the thought behind it, an introductory note mentions: “Art and finance coalesce in the elite world of fine art collecting and investing. Investors and collectors can’t protect and profit from their collections successfully without grappling with a range of complex issues like risk, insurance, restoration, and conservation. They require an intimate knowledge not only of art but also of finance. ‘Fine Art and High Finance’ is a comprehensive book on the various economic aspects of visual arts’ ownership. Whether as a guide to the world of investing or as a reference on specific areas of an opaque in art industry, it certainly deserves a place on every serious art investor's bookshelf.”

The document does not try to predict how the market will shape up in backdrop of the financial crisis, which greatly impacted contemporary art, still in the throes of some readjustment. Instead, after a quick glance at the modern art market history, the book refers to the market’s main players and current structure before moving to its economics. The fundamental point that Clare McAndrew makes is: “One of the most crucial economic features of the art market is, it’s primarily supply-driven ... increased demand ... cannot increase supply necessarily... and instead will only elevate prices.”

But then the market is tough to quantify, and so also its size, as pointed out by several contributors. Moreover, how does one assess a painting’s price when four portraits of Dora Maar by Picasso, all of comparable size and from the 1940s, can fetch prices between $4.5m- $85m within a span of three years? Many attempts have been made to formulate indices for art, but hardly any has been fully successful or competent. One of the known experts on the subject, Dr Roman Kräussl, has said: “All the art market price indices suffer bias owing to inherent problems that are there in the available data.”

In this context, a team of scholars along with the chief author-editor delve into some of the most complex financial and other issues ahead of art investors, such as appraisal and valuation; securitization and taxation; and insurance. They have also put together vital information on topics like art as loan collateral, investing in art funds, and the black-market art business. The writers collectively explain the various challenging financial matters invariably faced by art investors. Among the commentators from art, financial and legal industry backgrounds, who simplify the subject matter in a reader-friendly manner are Elizabeth Von Habsburg and Rachel Goodman, Gurr Johns Rena Neville, Sotheby's New York Ralph Lerner and Pierre Valentin, Withers Suzanne Gyorgy, Withers Barbara A. Ramsay and John K. Jacobs, Artex, among others.

Just to sum it up, the decision to put your money in art can pose tricky riddles. ; Fine Art and High Finance’ offers a wealth of precious background information to make a more informed decision.