Start-up aims to make investing in art more predictable

A new firm could help investors to more reliably predict returns on investment when purchasing works of art.

Arthena is a start-up firm based in New York, which has attracted the backing of Y Combinator, Beamonte Investments and Foundation Capital and is working alongside Charles Schwab brokerage. It uses big data to identify which artworks could generate major returns for investors. The start-up examines a combination of factors such as style, artist and size and combines these with human expertise to predict which works could make money. In practical terms, the firm manages a number of funds on behalf of investors looking for both low risk – low return and high risk – high return investments.

Despite a long-held view that art is inherently difficult to value and particularly difficult to predict potential value growth for, Arthena’s CEO, Madeleine d’Angelo claims that technology is opening up opportunities for investors to make more informed decisions when buying art to make money. She says: “We’re not advocating that art shouldn’t exist for art’s sake, or that people should stop building collections, but we want to make it more widely available as an asset class and investment opportunity.”

Arthena uses a combination of algorithms and human expertise to sift through data and select the best-bets to invest in. They generally identify artworks valued at below US$1 million and prefer works worth less than US$50,000 as they are easier to buy and sell in response to fluctuation in the market.

d’Angelo, who has a Masters degree in museum studies, founded Arthena with her brother who has a computation and mathematical engineering degree from Stanford University. The goal is to attract a new generation of investors and art lovers. Previously, art investment was seen as the reserve of high-net-worth individuals or wealthy families and trusts who would put their money into art funds. However, the growing availability of data on the subject helps open it up to those interested in ‘dabbling’ in alternative investments and those who simply love art and want to own pieces that will gain value over time.

The timing of the start-up coincides with an 18 per cent increase in sales of artworks from large auctions during the first half of the year. This is according to Deloitte’s Art & Finance report. The rise is said to be linked to a subdued equities market and lower bond yields One investor explained how art, as an asset class, is genuinely ‘different’, adding that, as it becomes more acceptable and accessible, it could be used to diversify portfolios in the same way that gold is currently.

Deloitte’s art and finance co-ordinator, Adriano Picinati di Torcello, explained that the increase in interest in art as an asset class is driven by the desire to own something tangible in order to protect portfolios in turbulent economic times. “Wealthy clients spend an increasing part of their wealth on art and collectibles,” he explained.

In addition to the availability of new data and start-ups like Arthena, it’s the news that works of art are selling for record prices that is also stimulating interest in the asset class. A painting of Christ by Leonardo Da Vinci sold recently at auction for a record US$450 million. The same painting was bought at auction just 60 years ago for £45 as it was thought to be by one to Da Vinci’s followers rather than by the great Master himself.

Although prices paid for the most valuable painting are growing, art is generally becoming more affordable. Anyone looking to buy their own work of art can now do so for an average of just US$800 at an Affordable Art Fair, which take place in ten cities around the world, attracting thousands of art lovers.

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