CITADEL LAUNCHES SA’S FIRST ART PRICE INDEX | BUSINESS ART
19 October 2011
MEDIA STATEMENT Art a serious asset class Investment in art has proved to be an excellent diversification strategy as this asset class can offer great returns over time, as shown by private client wealth manager Citadel’s Citadel Art Price Index (API) launched today. “As with any asset class included in the portfolios of serious investors, investment in art has experienced periods of volatility and at times are outperformed by the more traditional asset classes such as shares and bonds. Yet record prices achieved at auctions for South African art in recent years has shown that astute buyers and collectors can expect solid returns,” Citadel Head of SA Investments, George Herman, said at the launch of the Index in Johannesburg. According to the Index, developed for Citadel by leading independent economics consultancy, Econex, art prices achieved at auction tracks the JSE All Share Index quite closely over the period (since 2000, see graph). Both indices recorded large real returns from 2004 tot 2007, with negative real returns in the next few years. “This shows that both broadly follow the economic cycle,” Herman said. Hedonic API100, CPI and the JSE All Share Index
Source: Econex calculations
Compared to inflation (see graph below), the API100 and the JSE All Share index realised large nominal returns between 2004 and 2007 and negative returns in 2001 and 2009. The API has shown remarkably high real (inflation-adjusted) returns from 2004 to 2007, even compared to the JSE, especially when considering that art is not a pure investment, but a mixture of a consumption and an investment. There is a high correlation between the real returns of the JSE and the of the API. Yet, the returns have also been highly variable, with standard deviations of between 0.23 and 0.25. This implies that art has been a relatively highrisk investment strategy over the sample period, when measuring risk by the variance of returns.
SA ART TIMES. November 2011
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