In a concerted effort to further beat to death the concept of Art As An Investment, I found this new Merrill Lynch research report worth
Oh... and for those
financial geeks interested in further art financial beatings, please see this wise art Hunter blogger, or that witty floorwalker blogger, or that vulture girl blogger, or this smarty cat blogger, or plus that ultra smart blogger, oh, and not to ever forget this astute but edgy blogger, just to rename a few..
The US Investment Strategy team at Merrill Lynch, Richard Bernstein, and Kari Pinkernell, have published a new detailed historical asset allocation study, attached below. They looked at all the major asset classes (stocks, bonds, real estate,commodities, etc) which surprisingly included, ART ! They then compared the historic performance, and relative risks of each of these major asset classes. These results are presented in numerous
puffy pretty graphs. As expected, the Art sector didn't fare too well on an absolute return basis, but at least it was included! By Merrill Lynch including the Art sector, they implicitly suggest all investors should consider utilizing art as a regular part of a prudent long term financial plan.
The asset classes with their calculated probability of negative absolute returns for each are shown below for various time periods. The historic time periods spanned over 35 years, from December 1969 to June 2006. For art market returns, Merrill used data that only went back to 1976, which was provided by the auction data focused Art Market Research.
I thought this was one of the most interesting charts in the Merrill Lynch study
Of the 10 major asset classes, during a 5 year holding period,
- Commodities had the
worst highest probably of losing money, 41% of the time, followed by
- Gold with a 36% probability, and then
- Art with a 17% chance of a loss.
But just remember, Wall Street's analysis of any asset class (like art) that they don't sell, maybe
very a bit biased, plus it's just one way of looking at the potential risk of owning art. It doesn't take into consideration, non art auction related returns, and the all other non-financial benefits. Additionally, I wish they had analyzed and presented the return correlations between art and other asset classes. Intuition is the Art sector returns should be a better diversification tool than most traditional investments choices. Plus art looks pretty over the sofa, you ever try hanging a mutual fund or stock certificate on your wall ?? Ha! Just kidding.. but you get the point!
Well, you can read the study for yourself, but, the major
gee-whiz conclusions of this study are: chasing an outperforming asset class can end up hindering ones performance, and diversification among a broad range of assets is important. Not exactly revolutionary thinking on the part of Merrill Lynch.. so much for Wall Street "Professional" investment advice! Next!
Here's the actual Merrill Lynch Study - Deleted At the Request of Merrill Lynch.. Just Email me at mike@ModernArtObsession.com and I will send it to you.
And, this is a Bloomberg News Story written by Linda Sandler which also reviews the study, Download BloombergNews_MerrillStudy.txt