Typical Art Funds Swot Analysis - 1715 Words

5. Typical Art Funds—SWOT Analysis and Discussion â€Å"Typical art funds† here are defined as those diversified funds that modeled on mutual funds and private-equity funds. The subject of art funds has seen about as much enthusiasm as it has criticism from both the art and financial industry. Art funds have been mostly criticizing for the illiquidity and high transaction costs. In spite of the market inefficiencies that characterize the art world, art funds have growing appeal when they come to portfolio diversification, asset protection, economies of scale, and financial long-term solvency. This SWOT analysis identifies the internal and external factors that affect the performance of art funds, giving directions for future development.†¦show more content†¦Although this statement is controversial, art can indeed offer an opportunity to reduce risks of an investment portfolio in a market that underperformed with financial crisis and the subsequent recession. At worst, art is able to hold its value better than conven tional assets such as stocks and bonds, especially in an inflationary environment. Company shares might become worthless, but the value of artworks will never fall to zero. According to the Deloitte ArtTactic Art Finance Report 2014, 67% of collectors stated that the most important motivation for including art and collectibles in their portfolios was for diversification and capital protection rather than returns. Even though holding artworks in their portfolio does not increase the chances that the portfolio will outperform, investors will continually take into account for portfolio diversification. For individual art buyers, especially those with smaller amounts of capital to invest, investing in art funds enable them to achieve a diversified portfolio of art. The main strength of art funds is that they allow investors to pool their money together in order to purchase a wider selection of high quality works of art, removing the risk of investing solely in one medium or artist an d being at the mercy of current buying trends. This based on