To this end, I remembered that Diane Grams, now at Tulane (profile), did some research that was incorporated into a report for the Illinois Arts Alliance (report description here). In her work on executive compensation in the arts sector, she found that only 10% of respondents reported that their organizations contributed to a retirement fund, and of course we should interpret this even more carefully, because it is often the case that arts organizations employ many casual employees, who would not have any benefits at all. In a different research paper she presented, she pointed out that sadly, having a spouse or partner who was well paid was the main predictor of people staying in the arts area. (I’m too busy to track that one down at present.)

What concerns me is that it seems that in the US, then, people who go into the cultural areas are not only lower paid, but they are going into an area without a social safety net or provisions for retirement. Without going into any type of political discussion about the fairness of pay or whether we should value the arts more highly, it concerns me to think about people who by default in their career will have no provision for health care, and little provision for either retirement and unemployment issues. The way that these issues are handled relies on an assumption of long-term employment conditions that seem outdated even for workers outside the arts today, where job switches and contract work have become quite frequent. The erratic and contract based nature of creative jobs is even more dissimilar to our traditional views of working for one firm who would provide for health care and retirement. (Firms themselves find retirement and health care costs increasingly difficult to bear, even if they might want to, but that is a topic for another time.)

But there are now also a few interesting programs that are being set up to try and provide for the welfare of artists. In the case of visual artists, we have the Artist Pension Trust which is attempting to provide for artists in the future through donations of their work over time. (Interestingly, they incorporated as a for-profit financial services firm, currently private, although if one thinks about compensation structures for people in finance, a nonprofit structure might not have been able to attract as many financial experts.)

It is also interesting to think about what happens when these provisions are not via a firm, but are instead handled by the government, as we see with the quite different situation in the UK and EU. Although they are having similar pension struggles with older workers, in the UK working artists can use the benefits of the National Health Service (NHS), pensions via the national insurance scheme, and more flexible unemployment benefits that are more compatible with the flexible, short-term contract based work of artists and performers.

We only have to look at the vibrant contemporary arts production in cities like London and Berlin to realize that artistic work might not be well paid, but that it does not necessarily have to mean that you should not be able to have health care, unemployment, disability or basic retirement provisions.  Well, if I were an artist, I think you can imagine where I might be looking to move.

There are different ways to make a financial investment in artwork, but due to the complicated nature of the art market and the many expectations that differ from traditional financial market exchange, I usually suggest that novices with investment goals start by searching for an art investment fund, rather than buying work outright. Most of gallerists whom I have spoken with recognize that artwork does have investment value, but they tend to prefer someone who will buy works that have an emotional resonance, or aesthetic appreciation value. Given the recent troubles with people who have thought of their houses as too much of an investment, I also share this caution. Furthermore, being able to pick artwork at a low price that will go up in value over time requires some expertise, and a greater return is necessary to compensate for the relatively high transaction costs of buying and selling at auction.

Art funds, however, usually provide this expertise in-house, the same way that a hedge fund manager has expertise in stocks, bonds and other investments. Although this type of securitized art investment is fairly new, there are a number of established and upcoming funds with different goals. The best funds will offer the benefits of a diversified portfolio of artwork, expert advising, financial expertise, and transparency about management costs, goals and other factors. When you put money into one of these funds, which are usually structured as private equity, you are essentially buying a ‘share’ of their portfolio. Many of the funds have the added benefit of annual dividends, which could be preferred to a direct purchase of art, where the investor only sees money at the end of a fairly long holding period.

But is this socially responsible investment (SRI)? Well, if we think about the meanings of sustainable investing, through screens and filters, as well as other types of socially responsible investing, such as faith-based goals, artwork would be considered acceptable for many of these goals. For example, according to one expert in Islamic finance, the fact that the funds are backed by real assets means that they could be a type of Islamic investment. Another consultant that I spoke with laughed at the idea that artwork was socially responsible, but he said they could be seen as a type of passion investment. Artwork is not usually associated with sin products, environmental pollution, or other areas typically associated with negative screens. Credible fund managers  will also carry out due diligence on any work purchased, to make sure that it is not stolen property or under dispute.

While some people oppose the idea of treating artwork as a financial investment, a good number of those involved in the art market welcome new buyers, even if they are investors rather than traditional collectors. Purchasing shares in an art fund is not the same thing as donating to a museum, but it is a way of directing money toward arts and culture.

Potential investors with an SRI agenda should know that this type of (fund-based) investment does not usually benefit the artists directly. This is because living artists are paid for their work when it is sold for the first time through a gallery, but unlike film producers or musicians, they do not typically enjoy profits on future sales of their creations. Intellectual property rights protect them others profiting from the unauthorized use of the images or ideas, but artists are not paid from future sales of the actual piece. The exception is that in the European Union, and a few other places, auction sales are taxed by the droit de suite, or artist’s resale rights, which provide a form of royalty to the artist or their estate. Nonetheless, while the artists may not benefit directly if funds are purchasing work in the secondary market, it is possible to make the argument that for an artist to gain a greater following in the secondary market does improve their career prospects, at least indirectly.  (There are a few funds that have goals of providing income to actual artists, but these typically have a different structure, so I will not discuss these here.)

With these considerations in mind, my personal opinion is that we can think of art funds as socially responsible investing, but you have to think about your goals. This type of (fund-based) investment can provide some benefits to artists and those in the market, but bear in mind that it is not the same thing as directly “investing in the arts” by donating to a museum or other nonprofit engaged in arts and culture.  It might be more accurate to say that you are investing in the art market, as opposed to the arts. However, if you want to invest your money according to your values and interests, this seems to be a reasonable way to go about it.

As with all investment advice, be sure to do your research and due diligence.

In the company of these fine nonprofit researchers, I feel like a bit of a black sheep, because my interest in nonprofits has come as a result of my dissertation research, which is on the use of artwork as a financial investment and how this ‘financialization’ came to be. This led me to write a policy  paper about the potential negative consequences to museums that treated artwork as a financial investment, with some modest proposals about how we might avoid the loss of stakeholder trust that comes from liquidating permanent collections. Working on that paper has led me to thinking more about nonprofit assets and governance.

Despite my outsider status in the area of nonprofits (I have not specialized in nonprofit organization studies), I do have a healthy regard for nonprofit management as a part of organization theory and management studies. One thing that I liked in my training in public policy and management at Carnegie Mellon University was that we were encouraged to see ourselves as having the flexibility to move between government, nonprofit and corporate work throughout our careers. I suppose I have already done this alongside my academic career, because I have had the opportunity to work for several nonprofits in my role as a part-time GIS mapping consultant, including the Trust for Public Land and OpenLands in Chicago. While I am now pursuing an academic career, in the future I hope to do more research on nonprofits, as well as consulting work, and when teaching project courses, I hope to have local nonprofits as clients for my future students, which is a good way for universities to give back to the surrounding community.

I do have another rallying cry to study nonprofits, which is that from a theoretical perspective, if we study nonprofit and other forms of organization, this increases the diversity in the types of organizations studied, which is likely to bring about new findings for organization and management studies. (To make an analogy, anthropologists often  study one society at a time, but through comparison they are able to create more general theories and insights that inform researchers who work on different geographical regions.) Well, that’s my Chicago theory coming to the foreground, and I suppose I should end on that note, rather than going on about the increasing professionalization of the nonprofit community and creation of new epistemic cultures around nonprofit management. I look forward to seeing how this forum will evolve in the future.