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Investing in art as a tangible asset
How to diversify your investment portfolio with something tangible, aesthetically pleasing and that could increase in value over time. The art market has a casual relationship with the stock market; paintings can go up in value even when the market crashes, making it an attractive option for a diversified investment portfolio. Any potential return from art is based largely on supply, demand and specific market trends which can be very volatile and are based on multiple factors, so it is important to consult with a trusted adviser with an ear to the ground in the marketplace. What can start as simple curiosity can also become a true passion and hobby that can last a lifetime with the right tools and advice. It is important to educate oneself by looking at art. Visit galleries and museums, and seek professional advice from an art adviser. Once you can pinpoint your tastes and interests, it is always best to collect with a view that it could be hanging in your home for a long time because no matter what happens to the value of the art you then have something you love and that you can live with.
Generally speaking, there are three tiers of investing: 1. Lower priced objects by emerging or relatively undiscovered artists. Although higher risk and speculative, they have the potential to provide higher returns in the long term 2. Higher value objects by mid-career and established artists, which have shown stability in the marketplace over a period of 5-10 years 3. Extremely high priced objects for blue-chip trophy pieces, which often reflect the rarity of the objects or the egos of potential buyers. Often established artists make prints and editions, which offer the opportunity to enter into their markets at a lower price point. These usually hold their value, sometimes even making attractive returns (for rare prints or limited edition runs resold at the right time)
It is important to establish an objective and a strategy when entering the marketplace, whereby you are first and foremost collecting works that you are drawn to aesthetically, and that they are also vetted to ensure the greatest potential to hold their value.
Collecting for passion vs investment Collecting should always be primarily driven by passion; if collecting has yet to become something you are passionate about, you should, at the very least, collect what you like. While value as an investment is an important factor, ultimately like any investment there is no guarantee there will be a return. The beauty about investing in art is it is inherently never a loss, because you still have an object you ostensibly like and can live with. Ironically, collecting with this in mind usually proves to build the most valuable collections!
What should investors be wary of? Investors should seek the advice of a professional adviser to vet the authenticity of work, the fair market value, price, seller, and provenance. These are important aspects that help determine how much to spend on a work of art.
There are two main marketplaces from which to buy art: 1. The primary market, meaning bought directly through a gallery or an artist’s studio 2. The secondary market, meaning bought through auction or from a private collection. Both have their pros and cons and serve different purposes in the art world.
Having as much information as possible about the work of art is paramount, especially when investing in emerging art or buying on the secondary market, where it is even more important to seek the advice of an adviser who can guide on quality and value. Art is not a regulated investment, so there can be a lot of misleading information out there.
How much do you need to start a collection and where would you begin? A case study in how to go about investing in the art world. A common approach is for a client to enlist the services of an adviser to help educate them about contemporary art. The adviser should show them exhibitions and images of what type of art is available on the marketplace. They may walk them through an art fair or a museum to help the client get a clearer idea of what they like.
Executed in 1964
Sold at auction on behalf of an American collection
Once there is an understanding of taste, a client sets some clear objectives with their adviser i.e. ‘I’d like to invest 10% a year in art divided between mostly emerging artists with a few established pieces on which to hedge the majority of the collection’. The adviser helps the client get access to available works, negotiates on their behalf and filters material to make sure they are getting the best examples available. In time, the more art one sees, it is almost inevitable that tastes and preferences change, and the collection might develop in a different direction. This is where the adviser can help, to deaccession pieces privately or at auction to make room for new acquisitions.
Emerging markets in the art world vs emerging markets in the financial world The art world is growing rapidly with emerging markets in Africa and South Asia in particular. Major art fairs and biennales are becoming important calendar fixtures, such as the KochiMuzirs Biennale, Art X Lagos, 1-54 Contemporary African Art Fair, and the Indian Art Fair to name a few that are bridging the gap between international collectors and artists. They have widened access to new artworks, and to an extent, nurtured new collectors. Compared to other emerging markets in the finance world, these markets remain rather slow in gaining market share. This is due to less exposure of material by international artists in marquee auctions, museums, and galleries in the United States and UK. An exception to this is African art, which has gained more popularity as a result of growing support for art made by African-Americans. For the most part thought, we are seeing a growing demand for Western artists in these emerging markets from a new generation of collectors. Where in the world should an investor look for new emerging talent? There are galleries across the world that specifically showcase the work of emerging art. MFA thesis shows are also a good source to discover new artists. Their annual thesis exhibitions are usually open to the public. For example, every summer the Royal Academy exhibits new work by the students finishing their postgraduate study at the Royal Academy School in London, as does Goldsmiths. In the United States, Yale hosts an annual MFA thesis exhibition featuring work from candidates across painting, sculpture, photography and graphic design. There are many other universities that specialise in fine arts that does the same.
Shea Goli Contemporary Art Specialist
Shea is a contemporary art specialist at Gurr Johns. She advises private and trade clients on acquisitions and sales, valuations and collection management. She is based in London and is also a patron of the Serpentine.
Gurr Johns, founded in 1914, is the leading independent firm specialising in art advisory and valuations. The company acts as a discreet and trusted advisor to private collectors, family offices, attorneys and art institutions, navigating the art market to ensure that clients achieve best value.
