Investing for Art Lovers

For example, the American Museum of Natural History issued some $78 million in bonds through the Trust for Cultural Resources in New York City; the Please Touch Museum's bonds were issued by the Philadelphia Authority for Industrial Development. To buy nonprofit bonds, contact your portfolio manager -- these types of bonds are typically sold first to investment banks, which then extend them to individuals.

"You need to do the same diligence you would with any kind of financial investment," says Ken Kirsner of Bank of America, who has helped underwrite more than 200 nonprofit bond issuances around the country.

Investors should begin their research by checking out online credit ratings for cultural nonprofit bonds from S&P, Moody's Investors Service and Fitch. S&P gave the AMNH's recent bond issuance a very high AAA rating, indicating the museum's "pre-eminence" as one of the world's top natural history museums.

"Start-up [nonprofits] are traditionally the most risky because there's no track record and no operating history," Stern adds. S&P also notes the success of the AMNH's last bond issuance in 2004 and its lack of additional debt in the short term. It now has nearly 4 million paying visitors a year. The AMNH's bonds are also insured -- yet another positive sign.

Finally, Susan Fitzgerald at Moody's also suggests asking, "Is [the institution] something people will support via membership or gifts? What is the appeal of the institution, and can you see it sustaining through the life of the bond?"

If not, there's always the much-appreciated donation, which offers individuals a tax deduction and, for the museum, instant and obligation-free gratification.