Premier Art Finance Artemundi Group / 2019 Premier Art Finance Artemundi Group : 201 | Page 16

N ew York · Lon d on · Mexi co City · M a d rid
ART MARKET IMPERFECTIONS .
ART INVESTMENT RISKS ARTEMUNDI’S COUNTER MEASURES
AUTHENTICITY RISK The verification of genuine art is extremely difficult due in part to the absence of generally
accepted industry-wide best practices, including authentication processes and governance
authorities. We have developed a strict examination protocol to verify a work’s provenance.
This due diligence process also includes achieving consensus amongst the artist’s experts,
states and foundations.
ENTITLEMENT RISK
Transparent and secure ownership is vital to any market. We use title insurance, not as a
guarantee, but to strengthen the operation and consummate the sale of a work of art. The title
risk is transferred to the insurance policy issuer who assumes the loss if the insured artwork is
subject to a better legal claim by a third party, offering buyers another layer of security.
LACK OF LIQUIDITY
Art’s lack of liquidity functions favorably for assets with value stability and low correlation
with the stock market. The low volatility of art was accurately demonstrated during the 2008
recession when art indexes only dropped 4.5%, while the S&P 500 dropped approximately
37.5% Furthermore, in 2010, the All Art Index grew to 22.6% and 10.2% in 2011, compared
with the stock market’s 9.1%.
OLIGOPOLY OF THE
AUCTION HOUSES
We mainly use private purchase and sale contacts to minimize commissions, maintain
discretion and enjoy velocity in transactions. Auction houses are used for appraisal purposes
and placement of artworks that require a wide database of HNWI buyers.
CAUSALITY RISK
Casualty risk remains a constant reminder of the real and tangible properties of art. It is
indispensable when assessing the value of a collection to quantify the potential financial loss
and its “replacement cost.” Appropriate insurance coverage is mandatory, but preventive
measures can diminish risk. The use of experienced personnel, professional packing, high-
security warehouses and proper climate conditions minimizes insurance policy costs.
DISCRETION
Our econometric models and indexes, allow us to assure accurate valuations. In addition, our
+30 years of experience have secured our relationships with other market players and authors
in the field.
UNREGULATED MARKET
Over 167 laws regulate the British art market alone. Likewise, New York City has developed its
own Arts and Cultural Affairs Law. While de jure rules may become necessary, reputation is, in
the end, the most important de facto regulatory bastion in the art market. Reputation can be
inspired by trust, but it is mostly acquired by repeated success in transactions and trustworthy
assessments.
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