Art Investment Funds: The Feasibility Evaluation and Outlook of Art Investing

Abstract

This study explores the feasibility and challenges of art investment funds, with a focus on their viability as a business model and their potential to diversify investment portfolios. The study critically examines the unique characteristics of art as an asset class, highlighting its low correlation with traditional financial markets, which may offer resilience against economic downturns. Through case studies of art investment funds such as Xiling Fund, the paper evaluates the risks, long-term returns, and high transaction costs associated with art funds, suggesting that while they are not ideal standalone investment options, they can contribute positively to portfolio diversification. Adding a small allocation of art to a traditional 60/40 portfolio has been shown to enhance overall performance, improving the Sharpe ratio and reducing volatility. Furthermore, the paper investigates the role of securitized art investment platforms, such as Masterworks and Yieldstreet, which have made art more accessible to retail investors. The research also emphasizes the importance of selecting art investments in regions with growing economies, such as Africa and South America, where the art market is gaining traction. Ultimately, the study proposes that art should be considered a small, strategic component of a diversified investment strategy rather than a primary investment vehicle