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What Do March Madness, The NBA, And Investing In Art Have In Common? 

Steve Pomeranz, Investing In Art, March Madness

Art Investment Portfolios: How Do They Hold Up Over Time?

For the rich and the poor, investments outside of stocks are a good way to diversify your portfolio, be it with some real estate, corporate or government bonds, baseball collectibles… or even investments in art, which is what I plan to talk about today.

Economists David Chambers, Elroy Dimson, and Christophe Spaenjers developed a working paper entitled “Art Portfolios” in order to better understand the long-run performance of art as a separate class of assets. Within their study, they did not randomly look at art portfolios but studied the collection of a world-famous British economist, John Maynard Keynes.

Charles Keynes: Economist, Investor, and Art Collector

Who was Keynes? He was one of the leading economists of the early 20th-century. He was not only one of the most influential economists of his era but was instrumental in putting together the Bretton Woods agreement, which set monetary policy for the world after the Second World War.

In addition to being a renowned and respected economist, he was also a terrific investor—in spite of what you might think, being a great economist and great investor do not necessarily go hand in hand. According to records, in the eighteen-year period encompassing the Great Depression and World War 2, the Investment Fund he managed for King’s College at Cambridge University grew fivefold, a remarkable performance given that the UK stock market fell fifteen percent in the same period.

Keynes’ Instincts for Buying Art: Spot On?

His investment success carried over to his personal art collection as well. Through his abundant connections to the art world and “insider” tips from his artist friends, Keynes was able to accumulate the right art pieces at the best prices and enjoy them for the rest of his life.

And here’s the investment angle: Keynes amassed his 135-piece art collection for under £13,000 (about $16,000 at current conversion rates) and by 2013, his art portfolio was valued at over £70 million. In case you were wondering, this translates into a compounded rate of return of 10.9%

So, what does their analysis of Keynes’ little slice of the art world inform us about the art market? Well, for starters, it tells us that investment returns of 10% over a long span of time can add up to an awful lot of money.

Keynes’ Stellar Art Portfolio Returns Owed to Only a Handful of Artists

Secondly, by digging deeper and analyzing the performance of his art portfolio, it was found that his collection and the art market as a whole, was structured very much like a lottery, with lots of participants but very few winners.

This is why I say that art investing is like attempting to play for the NBA. Getting into the NBA is tough. Of the over 18,000 male students who play basketball in NCAA schools, only 44 are drafted into the NBA. Of the 135 works Keynes had accumulated, only a few showered him with enormous gains. In the meanwhile, the bulk of the other artists in his collection struggled to make any impact in the world of art or the world of money, for that matter. Ironically, probably the only group to make their fortunes on these talented but unfortunate also-rans were the art dealers. Keynes’ chances of success with his art portfolio was no different. Of the £70,000,000 value of his entire collection, nearly £64,000,000 was comprised of only 10 artists. Each of the 10 was worth £6.4 million, on average, compared to the remaining 125 artists’ works valued at £48,000 each, on average.

But what differentiated Keynes from other collectors was that he was smart about his purchases.  He liked to buy good quality art at low prices, and he concentrated 80% of his spending into those 10 works. For example, he bought works by Van Dyck at auction when prices were low and acquired more paintings in Paris right at the end of World War I when the market was depressed. He also had friends who were extremely knowledgeable and had an inside track to the market. This enabled him to acquire the well-known artists of the day, such as Degas, Cezanne, and Picasso.

Unless You Can Afford Marquee Names, Buying Art is Tricky Business

My key takeaway is that investing in art only makes sense if you have a lot of wealth and can buy marquee names, like Picasso, Koons, and Modigliani, to name a few. Most importantly, you will need to buy them at deep discounts, possibly during recessions or other economic slumps—the deeper the better. Moreover, the art market is highly illiquid, meaning if you really needed the money, you’ll likely end up selling your artworks for significantly less than their true worth.

Now, even though it is improving, it is hard to get good data about sales and prices. Therefore, I think most reasonable people would conclude that investing in art is very tricky and unlikely to deliver solid returns.

Finally, unless you have an edge in this quirky market, I’d say putting much of your wealth here will not have the outcome you desire, so skip putting Fine Art in your diversification toolbox.


Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph, or marketing piece to make decisions. The information contained herein is intended for information only, is not a recommendation to buy or sell any securities, and should not be considered investment advice.  Please contact your financial advisor with questions about your specific needs and circumstances.  There are no investment strategies, including diversification, that guarantee a profit or protect against loss. Past performance doesn’t guarantee future results. Equity investing involves market risk, including possible loss of principal.  All data quoted in this piece is for informational purposes only, and author does not warrant the accuracy, completeness, timeliness, or any other characteristic of the data. All data are driven from publicly available information and has not been independently verified by the author.