The Financial Market Vs. The Art Market

The Financial Market Vs. The Art Market, by Artfinding

At first sight, the financial and the art markets don't seem to have much in common. The first is a very pragmatic and down-to-earth field animated by mathematical models and short term speculation, whereas the second relies on passion or feelings animated by art lovers who more often follow their gut rather than decide by empirical evidence.

However, the art market counts a growing number of art dealers who come from the financial industry and manage to deal with these two antagonistic fields in concert. Fréderic Sioufi, the Parisian 18th and 19th Centuries furniture and works of art dealer, worked for 15 years as a financial trader in Paris and Tokyo. Christophe Hioco, an expert and dealer in Indian Hinduist and Buddhist statuary, spent 27 years working with the prestigious business bank JP Morgan with which he still maintains close relations.

We, at Artfinding, believe that the financial and the art markets have much more in common than one could think.

First of all, many of the major art collectors are financiers: Vladimir Lopukhin (Russian Business Banker), Bonko Chan (Vice-President of China Assets), Ignacio Liprandi (Vice-President of Merill Lynch Argentina), Richard Kramlich (CEO of an investment company), Jean Bonna (Banker), Petr Aven (President of Alfa Bank)... to cite a few. So people can work in the financial industry and still have a strong interest in the arts.

The recent burst of the contemporary art market bubble have revealed the hidden tip of the iceberg: speculation. This dynamic consists in purchasing risky investments that present the possibility of large profits. The financial market is driven by speculation. Similarly, ever since the 80's, many art "collectors" have literally invested in several fields of contemporary art - which is much more volatile than ancient art - in order to make profits. But in 2009, the global crisis has broken the chain and without new buyers, prices of contemporary art have dropped anywhere from 20% to 50%. As Mr Sioufi admits, “lots of wealth managers advise their clients to diversify their risks by investing 1% to 5% of their assets in the art market, mostly in the contemporary art market". So all together 5% of these assets present a huge amount of money, which creates without fail a speculative bubble. On the other hand "antique arts are less speculative and a safer investment", agree Christophe Hioco and Fréderic Sioufi. In a nutshell speculation certainly is a key feature that the financial and the art markets share in common.

Last but not least, a growing number of people are starting to apply financial & mathematical models to the art market. “As a trader, I am familiar with the financial dynamics and I often apply them to my art business. For example, as I ask myself whether a particular piece might be a good investment in the future, I often look at the recent performance of similar pieces as a strong indicator”, says Christophe Hioco. As most antique dealers don't usually consider art as an investment, the strategy used by Mr. Hioco seems to be the one to follow: in 2009, in the middle of the global financial crisis, Mr Hioco's company's (which has two activities of financial advising and art trading) profit increase was 40% in one year!

The art market deals with billions of dollars each year, fluctuations in trends can offer great business opportunities, ... and many other reasons will encourage a number of financial players to get more and more involved in the art market. One single rule needs to be followed if one wishes to invest in art, in addition to clever advice by an art market specialist, the first buying motivation of a work of art should be passion. Investing in what you love is a safe value guarantee.


Fréderic Sioufi (Galerie Atena)
2 place du Palais Royal
75001 Paris - France
Tel: +33 (0)1 42 61 79 72
http://www.galerie-atena.com

Christophe Hioco (Galerie Hioco)
12, rue de Penthièvre
75008 PARIS - France
Tel : +33 1 53 30 09 65
http://www.galeriehioco.com


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