| Summary: | The market for 'Fine Art' is dominated by institutions and auction houses. These act as gatekeepers
by monopolising the primary market. The choice of art as an investment vehicle is based on a
combination of expected return and subjective preference. The reason for investing in 'Fine Art' is
more than purely for financial gain. There are other more intrinsic factors that are considered as part
of the investor decision-making process. This market for 'Fine Art' can be considered largely
inefficient. Exclusivity, high prices, institutional based indexes and the overall lack of information are
by far the greatest drivers of this market inefficiency. 'Art' prices are usually set in the primary market
for 'Fine Art' through the auction process and the auction process should also typically reflect an
efficient way of creating shared value. However, the auction process in the primary art market is not
efficient and does not create shared value as would occur in a typical free market structure. The
systems employed by the auction process in the primary art market is a strategy in itself, giving the
impression that there is shared value, and thus distorting prices while simultaneously stimulating
investor confidence. This becomes apparent when the price for 'Fine Art' does not necessarily reflect
the 'true' value of the respective 'Fine Art' being sold. Thus investors may take advantage of this
situation, by traveling across international borders to purchase what they would consider valuable art.
In effect, art tourism is driven by market inefficiency in the 'Fine Art' market.
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