The investment strategies of art funds

This thesis study examines the conditions that laid the groundwork for art funds in particular, their formation and development processes, and subsequently analyses the properties of art funds as a type of investment fund, and their structure and diversity, ultimately closely examining their investment strategies in detail through examples. Although artworks have been known to be valuable for centuries, the classification and acceptance of artworks as an asset class is a newer phenomenon that occurred in the last century. The operating mechanisms unique to the art markets evolved within the limits of the potential provided by the developing technology as financialization began to dominate all fields. This evolution brought the worlds of art and finance together in new practices. As changing economic conditions impacted different geographic regions simultaneously, creating fluctuations in markets, investors sought safe investments. Emerging at this moment, these new art market practices became an anchor for investors, presenting them attractive opportunities. Building upon the structures of hedge and private equity funds, art funds are portfolios put together to create profit through the acquisition of artworks. Largely and increasingly in developing economies, these funds provide opportunities for High-Net-Worth and Ultra-High-Net-Worth investors who want to invest in art as either as a major investment or a diversification factor in their portfolios. This study aims to examine the emergence and developmental stages of art funds under the influence of capitalism and globalization, as well as the art markets’ unique dynamics and their transformation into new forms in light of the financial markets’ simultaneous evolution with technology. Thus, this study will underline the details of the operating mechanisms of art funds and their investment strategies to contribute to future studies in the literature.