Art Market Indexes: How They Work

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This material was prepared for informational purposes only and is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Unless otherwise stated, the material was not prepared by the Morgan Stanley’s Research Departments and is not a Research Report as defined under FINRA regulations. The material does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it.

Information contained in this paper is based on data from multiple sources and Morgan Stanley makes no representation as to the accuracy or completeness of data from sources outside of Morgan Stanley. References to third parties and third party websites by web addresses or hyperlinks contained herein should not be considered a solicitation on behalf of or an endorsement of those entities by Morgan Stanley.  Equally, except to the extent to which the material refers to website material of Morgan Stanley, the firm takes no responsibility for, and makes no representations or warranties whatsoever as to, the data and information contained therein. Nor do we guarantee their accuracy and completeness. Such addresses or hyperlinks (including addresses or hyperlinks to website material of Morgan Stanley) are provided solely for your convenience and information and the content of the linked sites does not in any way form part of this document. Accessing such websites or following such links through the material or the website of the firm shall be at your own risk and we shall have no liability arising out of, or in connection with, any such referenced websites.  By providing the third party publications and/or links to a third party web sites, we are not implying that Morgan Stanley has an affiliation, sponsorship, endorsement, etc. with the third party or that any monitoring is being done by Morgan Stanley or its affiliates of any information contained within the publications or web sites. The opinions expressed by the authors are solely their own and do not necessarily reflect those of Morgan Stanley. The information and data provided by the third party websites or publications is as of the date of the material when it was written and is subject to change without notice.

The material may contain forward looking statements and there can be no guarantee that they will come to pass.

Indices are unmanaged.  An investor cannot invest directly in an index.   Indices shown in this paper are for illustrative purposes and do not represent the performance of any specific investment.  Specifically, as this paper has highlighted,  indices have certain biases and also do not incorporate the full range of costs – transaction premiums, shipping, insurance, taxes for example  –  or illiquidity.

The indices selected by Morgan Stanley to measure performance are representative of broad asset classes. Morgan Stanley retains the right to change representative indices at any time.

Past performance is not indicative or a guarantee of future results.

Fine Art Indices are limited in that they do not include private sales and only report on public markets and used a repeated sale methodology.   Indices are not investable, and do not represent a return an investor could have expected to achieve.   Specifically, as this paper has highlighted, indices have certain biases and also do not incorporate the full range of costs (transaction premiums, shipping, insurance, taxes for example) or illiquidity.

Investing in the market entails the risk of principal loss as well as market volatility. The value of all types of investments may increase or decrease over varying time periods.

Diversification does not assure a profit or protect against loss in a declining financial marker. Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies. Equity securities may fluctuate in response to news on companies, industries, market conditions and general economic environment.

Funding investments backed by Art are subject to market fluctuations, creditor risks and other risks associated with the management of art institutions and public view.

Added considerations of holding Art can be illiquidity and marketability, carrying costs, insurance costs, liquidity risk, uniqueness and direct comparable limitations, transaction infrequency, selling costs, authenticity as well as other risks inherent to the art market.

This material, including any charts and graphs, has been prepared for informational purposes only. It does not provide investment advice or any advice regarding the purchase and/or sale of any artwork. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. It is not a recommendation to purchase or sell artwork nor is it to be used to value any artwork. Investors must independently evaluate particular artwork, artwork investments and strategies, and should seek the advice of an appropriate third-party advisors for assistance in that regard as Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide advice on artwork.

Readers should determine, in consultation with their own investment, legal, tax, regulatory and accounting advisors, the economic risks and merits, as well as the legal, tax, regulatory and accounting characteristics and consequences, of any transaction or strategy referenced in any materials. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

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