Art collectors as venture-stage investors

Given the growing understanding in cultural economics of artists as entrepreneurs, we consider whether art collectors can be modeled as fellow risk-takers, that is, analogous to venture-stage investors. Employing a unique dataset of the collection of twentieth-century United States-based collectors Burton and Emily Hall Tremaine, we build a conceptual framework of criteria for collectors as venture-stage investors. We consider risk (how early in an artist’s career they are collecting), reputation (collectors’ museum-related strategy), and rebalancing (donation and sales). Regarding risk, we find that 69% of works in our study were purchased within a year of when the works were made indicating venture-stage risk-taking, though with notably longer holding periods than within a traditional venture “exit” strategy. Regarding reputation, we consider the market impact of the 1984 Twentieth Century Masters show of the Tremaine collection and find the value of the artworks rose fivefold from the museum exhibition to the auction four years later. We build an index of artists whose works were in the 1988 and 1991 Tremaine auctions and also find strong indications of the importance of the timing of those sales to the returns achieved. Regarding rebalancing, we look at museum donation strategy as part of investment analysis, and find substantially different patterns of annualized ROI and holding period for auctioned and donated works. This study contributes to our understanding of art collectors as risk-takers and to the portfolio management of art collections.