The Very Subtle Art of Investing in Artwork

"Untitled" (1981) by Cindy Sherman sold for $3.9 million at Christie's in New York in 2011. Photograph: Metro Pictures via Bloomberg

Most people buy art because they love to look at it, but there's always the hope that the payoff will go beyond aesthetics. The prices of photographer Cindy Sherman's works have risen 11-fold in 15 years, according to Artnet, while Gerhard Richter's paintings are 37 times more expensive. Damien Hirst's works are up 22-fold, while works by Jean-Michel Basquiat and Andy Warhol have both risen 19-fold.

Investing in the right artist, however, can be a crapshoot, and owning artwork can involve substantial hassles. Many collectors must worry about insurance premiums, art dealers, thieves, taxes and most of all, the fickleness of the art world.

Dorit Straus knows all about these complications from three decades working with collectors at the Chubb Group of Insurance Companies, where she is now the insurer’s worldwide fine art manager. Bloomberg.com’s Ben Steverman spoke with Straus, an archaeologist by training, about the challenges of owning art. Edited excerpts of their interview follow.

Q: Is art an asset class like stocks and bonds?

A: There is some merit to that line of thought. A lot of people have a large portion of their assets in their art collections and they may not know it. It’s certainly important for financial planners to discuss this issue.

There are lots of downsides to art as investment. There are costs of maintaining art. The physical condition of your stock or fund doesn’t matter, but you have to make sure your work of art is in pristine condition, particularly in today’s economy...read more.