Similar to mutual funds, art funds consist of resources pooled together resulting in a large corpus. The money is used to buy art works. Assuming that the pieces would appreciate in value, the profits can be made by selling them at higher prices.
Art funds are usually close-ended with a lock-in period of roughly three-five years. Over a longer term, investors can expect returns to the tune of 25-30 percent. Those investing in art on their own, have to deal with subjectivity at one level, and veracity in the valuation and authenticity at another level.
In an art fund, a vast knowledge base is accessible apart from archival material. You also can avail of the supporting infrastructure with regard to administrative and legal machinery as well as tax structures difficult to handle on an individual basis.Osian’s, Yatra, Crayon Capital, Copal, Religare and Ask art are some of the funds operational.
However, falling NAVs (net asset value) have taken sheen off them in recent times. The funds have witnessed erosion in value owing to the slump in Indian art market. ArtTactic, the London-based research agency, recently attributed this to the economic recession and a drop in liquidity.
Putting things in perspective, Amit Sarup of Religare mentioned in an interview to Financial Chronicle that people had money but it would take some time to regain confidence and invest in art. In fact, despite the adverse circumstances, financial planners suggest art as an alternate investment option for good returns because interest in modern and contemporary Indian art remains high.
Indian artists are being showcased to a wider audience across the globe, adding to their aura. There's great value in these works in every sense. Experts continue to have faith in art as a proven asset performer that will withstand the test of time. According to them, first-time investor can allocate close to 5-10% of their portfolio to art. And by rooting your investment through art funds, you are assured of the asset manager’s technical expertise and domain knowledge.