ArtNet Analytics. A new offering at Deloitte's Art investment conference in Basel

The notion of art as an asset class was top of the agenda at the Deloitte 5th (bi)-annual art investment conference in Basel last week. One of the most interesting panel discussions focussed on the latest and most innovative online schemes in the art world. A panel of technology entrepreneurs put the case for increasing the role of technology in the arts industry. Boris Pevsner, President of Collectrium, revealed that the new mobile technology would enable a potential collector to point his iphone at a work of art at a fair or in a gallery and instantly receive all the available information on the artists and his creation. The sort of information that Mr Pevsner had in mind would be provided perhaps by servers like Art Net.

ArtNet's new offering, which was introduced by Thomas Galbraith (a distant relation to the great economist John Kenneth) Director of ArtNet Analytics . The art internet site now provides detailed information on individual artists, very much like ArtFacts, as well as charting the movement of the artist's index against a proxy index (Standard and Poor, Dax and FTSE) like Beautiful Asset Management (formerly, Mei Moses index). It does not deal in other works of art, which is still the sole preserve of Art Market Report.

A Report Index Graph will track the Movement of an artist over time. The methodological approach of ArtNet combines the Repeat Sales Regression, when there is sufficient data and the period of time long enough to generate significant results, and the Hedonic Regression in other circumstances. The artists indices are driven by these two methodological approaches. A Repeat Sales Regression is used for works of art that are homogenously grouped. The same methodology is used for single sales because the formula considers each work of art individually during the estimation process, but only using information from items that can be grouped as comparables. Crucially the data takes into account works that did not sell at auction. The creation of comparable sets of artists or characteristics of works of art is the other key component to the index's methodology. The index appears to offer a degree of flexibility hereto unavailable. The user can view indices in monthly or yearly segments and indices that represent a group of artists can be customised to account for the weight or distribution of an individual artist with the collection. The ArtNet index operates a cap-weighted index, in which higher valued lots are given a greater weighting than lower, and an equal weighted index which gives equal weight to all the components constituting the index. The various indices are updated on a monthly basis.

“China number 1 Art market – How will China impact the emergence of art as an asset class?”.

I was asked by Deloitte to address the question of art as an asset class. The proposition that China will assist in the evolution of art as an asset class is one that defies a definitive answer. I believe that over the next five years, China will succeed in imposing an art market regulatory framework that will operate, initially, most effectively in the major art hubs of Shanghai and Beijing. Professional dealer associations will be established to ensure on-the-ground observance of a new code of behaviour within the art market. Art Funds, that have sprung up in the wake of an effective primary market in China, will be allowed to fail or be closed by city governments. The Cultural industries in China will continue to grow and generate income and creative capital. It is uncertain whether this will lead to the financialisation of art in China. It is certain that as long as currency controls exist in that country and significant taxes are attached to the buying and selling of art, the market will not internationalise. This is no bad thing.

My conclusions are:

• The Chinese government is anxious to prevent speculation in the art market

• It is embarrassed by the flouting of art market conventions in China and by Chinese overseas

• It sees art, primarily, as an object of national (cultural) significance rather than an asset class

• The new collectors who are opening private museums in Beijing and Shanghai are collecting for non-financial reasons (?)

• Private Museum building programmes in China: Dai Zhikang (Zendai) (Himalayas). Wang Wei (Long Museum) in Shanghai. Li Bing (He Jing Yuan Art Museum) in Beijing. Centre of market may now move to Shanghai and HK

• International laws preventing the trade in Rhino horn and ivories as well as China’s reluctance to export its art mitigate against a free art investment market.

• The large markets in ink painting, scholars rocks and jade are subject to manifold problems in authentication and therefore unreliable as an asset class.

• The products traded in the China market are not internationally convertible.

BUT:

• Greater regulation and more accurate data suggest that the market is moving towards an investor friendly environment

• The soft economy directive of the next five year plan will lead towards the acceptance of art as an asset class

The Deloitte Art Investment conference which last took place in Art Basel Miami and will next coincide with The Fine Art and Antiques fair in Maastricht, the Netherlands, has become an art investment brand, and is now a market leader.

The problem with treating art as a pure investment is that art is consumed in a different way to every other asset or commodity and cannot be reduced effectively to digital pixels and data, where it loses much of its meaning and therefore value. Contemporary art requires a physical context . This is why collectors travel to the art fairs, like Basel, in their hundreds of thousands. It is why Documenta in Kassel which lasts several months, allows its audience to engage in real time with the work of the next contemporary art movements. It is why the art Biennale has become so popular and well visited. Art is a social activity, and the art world is tribal. The physical encounter is as important to those who work in the industry as the work itself. And finally, all art, old and new, needs to be touched, smelt, heard (on occasion) as well as seen, in short physically experienced, to satisfy the buyer. Investment will always be just a portion of arts total value.