LEGAL RISK ALLOCATION IN ART INVESTMENT: SEPARATING INFRASTRUCTURE ACCESS FROM MARKET RISK

Fine art is marketed as an uncorrelated asset class whose Sharpe ratios and volatility profiles justify inclusion in diversified portfolios. Yet these metrics reflect returns generated within an institutional legal apparatus: title vetting, perfected liens, and legally enforceable authentication warranties. Because repeat-sales indices rely on transactions that have already cleared this screening mechanism, financial models interpret title defects and provenance disputes as continuous price volatility. In practice, legal disputes represent binary, discrete losses that arrive without warning. This article operationalizes the theoretical divide between institutional due diligence and retail fractional exposure by analyzing quantitative and procedural risk parameters across both transactional tiers. The analysis shows that without automated multi-modal verification and cryptographically auditable screening standards, contractual and insurance remedies remain structurally ineffective for unaccredited investors.