Art Auction News: Aspire: Art as an Investment Asset

Business Art News

ART AS AN INVESTMENT ASSET www.aspireart.net

Artists, art lovers and the vast majority of serious collectors make or buy art for the love of it. And that’s how it should be. But there remains a fascination with art’s investment potential, and how much it can be worth at the very top end of the international and domestic South African markets.

While it’s true that it’s often difficult to quantify the enormous investment possibilities of art, recent research offers us a more accurate big picture. Last year the total art market was valued at $67.4bn – an increase of 6% year on year. Among the individual sales contributing to that revenue was perhaps the most famous single art sale of recent years, the purchase of the last Leonardo da Vinci to be held in private hands, for $450m (R6.5bn) at Christie’s New York in 2017. These massive individual sales are in fact relatively unusual, since such works are generally owned by museums and public collections and don’t appear at auctions.

Perhaps more persuasive from an investment point of view is the case of a work by living artist Richard Prince: acquired for $38,125 in May 2000 at Sotheby’s in New York, the painting All I’ve heard (1988) sold for over $2.5 million in November 2017. For the seller, that’s a return of +6,550% in just over 17 years, or an average annual ROI of +28%. Even more impressive is the return on a painting by New York artist Jean Michel Basquiat, who also holds the record price for a work of contemporary art, when his painting Untitled (1984) sold for $110.5m in 2017. His Jim Crow (1986) sold for $136 362 at Christie’s in London in 1992 – in 2017 the same work sold at Christie’s in Paris for $17.7m.

Basquiat, Jim Crow Image courtesy Christie’s (www.christies.com)

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Marlene Dumas, Love Lost Sold at Aspire 2019, R7 283 200

These huge numbers at the top end of the market indicate the growing international trend to acquire top examples of contemporary art, largely debunking the starving artist myth of previous centuries. The trend is no less true in South Africa.

In terms of actual investment returns, the contemporary art segment is one of the best alternatives to traditional financial investments. In the segment the average annual yield is +8.1%, and the average holding period for a work of contemporary art (i.e. between its acquisition at an auction and its sale at another auction) is only nine years. This means that the contemporary art segment is fuelled by a market continuously supplied with new works. Other segments suffer a progressive contraction of prices as the major pieces gradually disappear from the market to join museum collections, with an inevitable negative impact on the segments’ overall quality. Since January 2000, the price index for contemporary art globally has increased +88%, compared with +85% for the S&P 500. Over 18 years, the two indices have posted roughly equivalent gains of +3.5% per year, on average. The segment therefore performs as well as US equities, and outperforms

George Pemba, Revival, Sold at Aspire 2017, R454 720

both the CAC40 and the FTSE 100 over that time. It provides the perfect opportunity for an alternative investment to diversify an investment portfolio.

In the South African market, comparable returns on investment are achievable as this market grows at an even higher rate than that of its American and European counterparts.

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But no matter where in the world it is, the key to successful investment in art is targeting and acquiring the right signatures and works.

There are only four South African artists who appear in the Global Top 500, gauged by auction turnover: J.H. Pierneef, Irma Stern, William Kentridge and Marlene Dumas. The fact that all of these artists have an established

collector profile and performance level at auction means that the barrier to entry in their markets is relatively high, at least for rare and high-quality works by each artist. The sale of a work by Dumas in South Africa, at a recent Aspire auction in Cape town, established a new local auction record of R7 283 200, an indication of the price levels at which works by these artists changes hands.

Outside of these top global South African signatures, an artist like Alexis Preller is a good example of potential returns from investment in art locally. Largely only known and collected in South Africa, Preller’s work showed no great investment profile until relatively recently. Between his death in 1975 and a work achieving a price of R1.5m in 2008, his market had been flat. With the appearance of an authoritative visual biography in 2010 helping to develop and grow his market, prices steadily increased, surpassing the R9m mark in October 2018 at an Aspire sale in Johannesburg for a work entitled Adam (1972). For other art in the South African canon, the under-represented work of various black artists during the mid- to late-twentieth century is becoming steadily more collectable, helped by the recent exhibition The Black Aesthetic, which brought the best work of artists like Dumile Feni, Sydney Kumalo and George Pemba together in a major show for the first time in many years.

The collectable value of a particular artist is of course never guaranteed, particularly in an auction environment where pricing is transparently set by previous auction precedent. But much can be done to evaluate which art and artists might become a good investment for the future. Where an artist has been doing well and showing at prestigious venues, this will help the resale and auction prices achieved. This is true, for example, of Cape Town-based contemporary artist Athi-Patra Ruga, whose prices have escalated by hundreds of thousands in a few short years since his debut at auction in 2016.

Collectors also need to pay attention to the quality of works within a particular artist’s oeuvre in order to realize resale value. Education and advice are always available and close attention to the markets, as with any other asset class, is vital.

Dumile Feni, Children Under Apartheid (Detail) Sold at Aspire 2017, R1 250 480

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