WHY INVEST IN MODERN MASTERS
- Although the market for contemporary art is huge today, the actual number of contemporary artists that sell for high prices at auction all over the world is pretty small.
- Some auction data, such as the percentage of an artist’s work that sells successfully at auction, can be useful.
- Record-breaking sales do not necessarily have a huge impact on prices for that artist.
- Comparable sales data only tells you so much about what art works will be sold for in the future.
- Most importantly, if you want to build an art collection, you should think long term and only buy the things you love.
The global art market is booming. In 2014 sales reached a record €51 billion ($68 billion), nearly double the level of 2009 and slightly above the previous peak of €48 billion in 2007, according to the European Fine Art Foundation. Recently an anonymous buyer paid $300m for Paul Gauguin’s “When will you marry?” (pictured)—the highest price ever paid for a work of art. A few days later another record was broken when an American paid £30m for a painting by Gerhard Richter—a record for a living European artist. On average, prices for contemporary and post-war art have risen by 19% over the past year.
The sums changing hands are so colourful that they have inspired a whole new profession: consultants who pick out paintings for their clients based not on aesthetics but on potential returns. Philip Hoffman, who manages funds that invest in art on behalf of rich families, notes a steady shift from buying art for pleasure to buying for investment. According to Deloitte, a (conventional) consultancy, rising prices in recent years have attracted lots of speculators: nearly three-quarters of art purchases are made at least partly as an investment, up from half as recently as 2012.
Institutional investors first entered the art market in the 1970s as a hedge against inflation: the pension fund of British Rail, for instance, put £40m, or about 3% of its holdings, into oil and canvas. (Although returns were not bad, it sold its last piece in 2003.) Art is also billed as a useful form of diversification, although like many other supposedly “uncorrelated” assets, it did not live up to that billing during the financial crisis. Another selling point is that it is tangible—a popular attribute since the crisis, when lots of abstract and incomprehensible financial instruments proved huge liabilities.
Unlike many other real assets, such as farmland or property, art is also movable, which is handy for buyers who do not plan to tell the taxman about it. It can be a relatively discreet way of investing, too: Christie’s arranged $916m of private purchases in 2014, compared with just $266m in 2009.
FINE ART CAN BE A FINE INVESTMENT
The painting you bought to match your sofa may increase in worth, or it may be as saleable as your kid's pasta-filled craft project. As with any investment, you need to do your research and go beyond your comfort zone. The art market is fickle, and there are no guarantees of profitability, but with a little legwork and forethought you can fill your home with images that may prove worthy investments down the line. Consider these tips for choosing fine art and identifying the Michelangelo from the macaroni.
Original Ideas: Paintings and GicléesYou walk into a gallery and fall in love with a $5,000 painting, but you just can't justify the price tag. The gallery owner shows you a selection of the same artist's work for a humble $500, explaining that the pieces are giclées. A giclée is a machine-made print, a reproduction printed on fine paper or canvas with color and clarity that can rival the original. But it's still a copy.
The rarity of a work of art is what gives it value, so an original will always be worth more than a reproduction. While a giclée may come labeled with superlatives like "museum quality" or "archival", and the seller may hawk a certificate of authenticity, it will never be as valuable as an original. Some artists and appraisers even view giclées as a gimmick for novice artists and neophyte collectors.
Doing the Loupe de Loupe: Prints and Posters Maxfield Parrish and Courier & Ives brought art into the homes of America at the turn of the century with their mass-produced prints. These images are the predecessors of the posters sold in malls and museum shops today. Posters, like giclées, give you access to a masterpiece, but a poster is not the same as an original print (an impression on paper done by pressing the paper on the matrix that the artist has drawn/carved with his/her own hands before ink is added on), which can be in the form of a lithograph, etching/aquatint, linocut, woodblock, serigraph/silkscreen.
You can often distinguish an artist print from a poster with the naked eye, though in some cases you may need a loupe or magnifying glass. The process of offset printing leaves a tiny dot matrix on the paper - think of a comic book or a Roy Lichtenstein painting with its exaggerated dots of color.
Several factors determine the value of an artist's print: the size of the edition, that is, the number of prints the artist makes of one work; the significance of the work; the condition of the print; and whether it is signed and numbered by the artist. In the market for prints, it is rarity that bestows value. A low run of limited edition prints is more valuable than a mass-produced image.
Cruising Cruise Art Auctions. A cruise art auction is exactly as it sounds: it's a sea cruise that displays and sells fine art. With name-brand artist prints, drawings and paintings that come hyped with certificates of authenticity, the cruise auction can seem like a boon to the aspiring art investor.
The artwork changes each day as lots are sold off, and written appraisals suggest pieces are offered at a fraction of their value. You might feel like you've stumbled into a floating investment paradise. The artwork at these auctions is genuine (most times), but that doesn't necessarily make it a good investment. Cruise auctions work on the principle that buyers believe authenticity equals high value. Unfortunately, authenticity does not guarantee the rarity of a piece or its importance in the art world. The critical guideline for buying art cannot be repeated too often: art that is valuable is art that is rare.
Final Tips for Investing in the Arts:
When you're ready to hit the galleries and invest in the future of art, go in with your eyes wide open. Gallery owners will tell you that buying art is an emotional decision, but don't fall for that line if you are thinking of it as an investment. Research any artists who catch your eye. Visit museums, galleries and art institutions in your area regularly so you can recognize potential movers and shakers in your region. If you're considering a piece by a renowned artist, get an appraisal. Look for quality, and don't buy anything in bad condition. With a little effort, you may befriend the next Rothko or unearth a lost masterpiece that's worth a million.