Borro attended the Art Investment Conference run by the London Business School and was particularly impressed by the talk led by Professor Elroy Dimson. He enlightened us on the importance of art portfolios in the case of John Maynard Keynes. We discovered three main factors to consider when developing an art portfolio.
John Maynard Keynes was a very influential British economist, who died in 1946. Whilst most books about Keynes focus on his economic contributions, we’re more interested in him as an art collector.
Perhaps it was his economical mind-set that drove Keynes to view art as an investment, and change the way we see art now. He looked after his pieces in a way that they were considered financial assets – which they are. He ended up building a portfolio that outperformed the British equity index by an average of 8% year over year for a century.
He much preferred buying from auctions rather than artists as this was far more economical. He collected 73 pieces in total, none of which ever left his collection. 25% of the value of this collection is held just buy one piece: Paul Cezanne’s ‘Apples’ painting.
The value of Keynes’ collection has significantly increased over time. This is in terms of the estimated value of the collection, the real value of expenditures and the value if invested in equities.
So, what can we learn from Keynes?
- Art is an investment. It is an asset that can hold significant value and the ability to raise finance so we should consider that when making purchasing decisions to enhance our art portfolio.
- Art purchases should be made from auctions. There’s nothing wrong with buying art from other sources, especially when the dealer is someone you trust, but auctions were Keynes approach and was a very successful one at that. A lot of alternative lenders, such as Borro, will provide loans to those who are looking to raise finance against their assets only if they have an auction history.
- Pieces in your art portfolio should vary in value. Keynes knew where to incorporate more valuable pieces in his collection and when. When purchasing extremely high value art, consider why it is that price, will it go up? What is the quality of the piece? What measures do I have to take to ensure that the quality is maintained?
Keynes was overall an outstanding character, and his art collection reflected that. He knew to see art as a financial asset and was able to build a valuable collection. But don’t get too caught up in this, just because he was economical doesn’t mean that this is his only connection to art. He loved it and admired it, seeking pleasure from viewing and building his collection. Art is something to enjoy, the finance is just a very pleasing bonus…