Part of a growing trend of buying scarce assets, art investment is booming but it remains a niche market with considerable risk attached. Here’s what you need to know…
The traditional asset to invest in during uncertain times is gold but between fluctuating markets and Brexit, other tangible classes have come to the fore – wine, whisky, antiques, property – and art. According to a report by Saatchi Art, in 2015 the global art market was valued at $63.8 billion, only slightly down from $68.2 billion in 2014. However, it’s worth noting that the market for works sold for more than $1m is robust, growing at four times the rate of the general market. Despite the slight decline, art investment has much to recommend it. Not only was it quick to recover post-recession in comparison with other investments (bouncing back to $57,025 in 2010 from its low point of $39,511 in 2009*), in times of economic turmoil, art performs well. According to art consultant and former Wall Street portfolio manager Cappy Price, art has outperformed during all of the wars of 20th century and during the last 27 recessions**.
Salvador Dali’s Figura de perfil (La Hermana Ana María)
(painted 1925), estimated at £800,000-1,200,000, © Bonhams,
Impressionist and Modern Art sale, 2nd March, London
How to start
Think of art as you would other unique opportunities, such as venture capital investment. There may be a track record of success with particular artists but each work is different and the whims of the market can be fickle. Ultimately, its subjectivity is what makes the market for art so vibrant. What a piece sells for may not indicate its resale value, while investing in underappreciated or undiscovered artists tipped to be the next big thing can be a gamble. It’s no wonder that David Stevenson for The Financial Times has compared buying emerging art to investing in frontier market equities**.
Emily Lamb (b.1985, granddaughter of artist David Shepherd), Past Presents, oil on canvas, 39 1/4 x 58 3/4 in.
(99.7 x 149.3 cm.), £6,750, Rountree Tryon Galleries [an artist picked as a good investment by Jamie Rountree
The motivations to buy art rarely match the dispassionate attitude that investors have towards other assets, such as equities, and can sell purely on aesthetic qualities or cultural significance rather than a good return. Similarly, many collectors don’t wish to part with their art no matter how profitable a sale might be. ‘Value is an esoteric metric at the best of times but there are factors worth considering,’ explains Ralph Taylor, director, UK Board, Post-War & Contemporary Art at Bonhams London. ‘For example, ask yourself: is the work unique, is it the best of a series, is the series the best of the artist’s oeuvre, how many intermediaries are charging you commission, is it from the right date, is it in good condition and has it got good provenance. It’s also worth considering if the work has been authenticated by the artist’s studio or foundation, if it’s been shopped around at art fairs and for sale privately and is it in the right monographs and the catalogue raisonné?
What to look for
How much to spend and what to spend it on is dependent on why you’re investing, whether that’s primarily in hope of a good return or combining it with a passion for what you’re buying. ‘In terms of how much to invest, it can be as little as you want, or as much as you want,’ says Tamila Kerimova, head of day sale, 20th Century & Contemporary Art at Phillips auctioneers. ‘In order to invest in more bluechip artists who have higher probability of going up in value, one needs bigger capital. For example, the story of Hugh Grant buying an Elizabeth Taylor painting by Andy Warhol for $3.6m in 2001, only to sell it for $23.7m six years later.’ What makes a good investment depends on how much risk you’re willing to take. Emerging artists, for example, can offer a high percentage return if their work steadily increases in value – however, the chances of discovering the next big thing are low. Those looking for a sure thing would be wise to defer to established artists. ‘Banksy is the best-selling artist around the world and his work is almost guaranteed to increase in value,’ says Sam Rhodes, gallery director at Lawrence Alkin Gallery. ‘Works by modern classics such as Damien Hirst, Francis formula to investing in art, it would be more widespread, so maximise your chances of a good return by following the market closely. ‘Always have a specific price in mind that you will not go over when purchasing then work out whether you will make a profit over a five-year period,’ suggests Jamie Rountree of Rountree Tryon Galleries. ‘An art purchase is a mid to long-term investment, not a quick flip.’
René Magritte, La folie Almayer (executed1959), estimated
at £300,000-500,000, © Bonhams, Impressionist and Modern
Art sale, 2nd March, London
Where to find advice
Speak to specialists in the field you’re interested in. Art advisors can be useful in helping you build a collection, especially if you don’t have time to hunt down pieces you like. Auction houses and galleries may offer this service and charge a finder’s fee or percentage, plus there are independent advisors who can offer guidance. ‘An advisor should be able to point you in the right direction having ascertained where your tastes lie,’ says Ralph Taylor. ‘They should be able to get you access to an artist and negotiate a discount, though generally speaking you’ll have to pay that saving to them. If in doubt, develop a relationship with a senior specialist or director of an auction house. Never forget that as a collector you hold all the aces; auction houses, galleries, artists and advisors all want to do business with you.’
VICTOR VASARELY (1906-1997), Tridim-RR, 1968 [check]
© Bonhams, Post-War & Contemporary sale, 8th March,
London [example of op art]
Bacon, Tracey Emin, Henry Moore and Peter Blake are all more than likely to appreciate in value.’ With contemporary art tipped to be the more reliable market, it can be worth looking at the areas that are currently undervalued, such as Old Masters, watercolours and Victorian paintings. ‘Theoretically, anything unfashionable now should come back into fashion in the future,’ suggests Matthew Barton, auctioneer of European and Asian works of art. ‘The trouble is that it could be 20 years or more before this happens. There is more scope for discoveries in underappreciated areas of the market. Indian and South East Asian works of art are often not expensive and given the growth of their economies, it is surprising how little is bought by Asian collectors. As with the Chinese market, this could change in the future.’ Female artists have been undervalued in the second half of the 20th century, partly due to generational bias, but that’s changing. ‘There has to be a shift as museums around the world look to the great female artists and beyond the traditional, canonical figures,’ predicts Ralph Taylor. ‘There’s a similar situation with various movements, including Op Art. This was an international movement with the key players hailing from countries such as Hungary, Poland, Venezuela and Brazil, etc. These countries didn’t have traditions of collecting art or building museums to Contemporary Art so the support structures and ‘value-givers’ weren’t in place until recently.’
Pitfalls, tax and charges
Unfortunately, it’s not just the price of the artwork that needs to be factored into an investment decision. Transport, storage, restoration or reframing can add to the cost as well as auction fees and taxes. ‘Works that are large, heavy or complicated will be more expensive to transport and store, so always speak with a professional; your advisor or auction house contact can help depending upon your location or the type of object,’ says Ralph Taylor. ‘When buying works in the UK that will stay in the EU there is generally 20% VAT; if buying artworks outside the EU and shipping them into the EU there is a 5% import fee. When buying at auction, all of the major houses charge 25% up to £100,000, 20% net of that to £2,000,000 and 12% thereafter.’ You may also require an export licence if you’re taking a cultural object out of its country of origin. Given its unpredictable nature, investing in art may not be for the faint-hearted but being aware of the hazards helps to offset them. Art advisors, galleries and auction houses may be able to provide sale prices of comparable works to help indicate the value of a piece while learning about the artist adds context to an investment. Knowing about any awards or other notable collectors can also indicate the value of an artwork, plus carefully curated, a collection as a whole may be worth more. Art as an investment class is for the well advised, but given the rewards beyond the financial, it’s one of the most beautiful ways to speculate.
Kazuo Shiraga (Japanese, 1924-2008), Séi (1991), estimated at £500,000-
700,000, © Bonhams, Post-War & Contemporary sale, 8th March, London
Art & Culture