A Merrill Lynch report is painting a picture of art as a poor investment, which may help explain why, as a fund vehicle, it hasn’t caught on, and why there is only one art fund still in business. According to Merrill, there’s a 17% probability that art investors will lose money over five years, despite the fact that some pieces are selling in the triple-digit millions. In contrast, according to the report, investors face a 3% or less probability of losing on corporate or long-term term Treasury bonds, or even small-cap stocks. Merrill explains that those who stand to make money in art are “those who have truly long-term horizons.” Even so, historically, art may draw interest, but in terms of returns, brushes the bottom of the barrel. The study found that in the 1970s, for example, art was the worst performer among eight asses classes, with greatest chance for losses, and in the 1990s was only slightly better than commodities and gold, which returned -50%. Today, art shares the poor performance distinction with foreign stocks and the Standard & Poor’s 500, the study concludes.
