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The Actuary The magazine of the Institute & Faculty of Actuaries

Art and actuaries

Actuaries are probably not the first people you would think of if you wanted to discuss artistic endeavour. Stereotypically obsessed with spreadsheets and complicated statistical formulae, it could be reasonably inferred that we wouldn’t have a great deal to offer the art world. Indeed, my own artistic experience reads as follows: I have been to a few museums, I got a GCSE in art, and I used to make ‘sculptures’... out of LEGO... until I was five... okay, fine, until I was 15.

There are, however, already a number of ways in which actuaries contribute to enriching the art world. Perhaps the most obvious ones are valuing art as investment and offering insight into the insurance of fine art and specie.

I am sure that there are those who, upon seeing the words ‘art’ and ‘investment’ in the same sentence, would screw up their noses with distaste. Whatever your own opinion about the value of art, there is no denying that it is often seen as an investment. Indeed, most people who own something that they regard as art do so because they bought it. And once it’s been acknowledged that something has some monetary value, the only thing left to do is argue about the price. Furthermore, art may be better preserved if those who own it believe it could be a significant source of wealth.

These days art investment isn’t just left to individuals rich enough to purchase paintings and other artworks. There are a number of investment firms that specialise in allowing a layperson, seeking high returns, to invest in art.

While I am all for leaving the valuation of a shark in formaldehyde to an expert (although I can’t help but wonder what kind of formula/parameters one would use to value this), it is clear that there are plenty of opportunities for actuaries to offer insight into the valuation of art as an investment. The uncertain nature of its future value and the need to project this should set bells ringing in any actuary’s mind. The potential for ‘black swan’ events — the discovery of a previously unknown work or the record-breaking price of a current work of art, such as the £51 million Chinese vase sold at auction in November last year — allow us to bring expertise of working with extreme and tail events.

The correlation of art with other investment assets has historically been low, and this trend has continued into the economic crises of recent years. Can actuaries investigate the offered explanations behind this? Is this a genuine effect or is art another asset bubble?

The value of art can be prone to the vagaries of fashion, and predicting the ‘next big thing’ is rarely straightforward, so perhaps art as an asset class may also show some of the limitations of what actuaries can currently achieve. In recognising these limitations, we should be spurred on to develop better ways of doing things. Art may help create the next generation of artisan actuaries who lift our profession to a higher plane.

For further reading on this topic, see ‘On the return of art investment return analyses’ from the Journal of Cultural Economics (Volume 19).


Seriously, you’ve never read... Portnoy’s Complaint?
This month Cian Reynolds, actuarial trainee at Lloyds Banking Group, looks at Philip Roth’s best-known work, first published in 1969.

Did it live up to its reputation?
Portnoy’s Complaint was the novel that propelled Philip Roth into the public consciousness. When originally published, the book caused controversy over its vivid descriptions of sexual acts and its apparently irreverent depiction of Jewish life. The story takes the form of a monologue where the eponymous character relays a ’confession‘ to his psychoanalyst. In his early thirties, Alexander Portnoy is a lapsed Jew, gifted, successful and altruistic. However, he experiences pangs of anxiety stemming from his perceived perversions and lack of serious relationships.

Although I can see how the book caused quite a stir in its time, the imagery seems quite tame now when compared to contemporary forms of entertainment. I would agree, however, that it would still hold its own when it came to explicit language. I also felt that the criticism over its portrayal of the Jewish diaspora was unfair since, in my opinion, this was a clear example of astutely aimed satire.

Why read it?
Any book that has been censored is worth a look. Our honourable profession also gets a mention about halfway through.

Who would you recommend it to?
Steer clear if offended by ribald language — otherwise, go for it.