The internet has provided unprecedented access to knowledge about virtually any topic imaginable from nuclear science to history, from healthcare and politics to investment strategies, legal strategies and Flat-Earth theories.
A keen eye can find support or dissent to any subject, depending on where they look and who they trust. Doctors often find themselves confronted with Google Experts diagnosing symptoms and directing treatments. However, as any medical professional will attest, a Google search will not supplant years of hands-on experience and expertise.
As fine art continues to prove itself as an asset class within its own right, clients continue to seek out trustworthy, third-party advice on art as an alternative investment. Given the unique properties art, any investment should be evaluated with the same rigor as any other major financial decision.
While dilettante study is often a useful and necessary in order familiarize yourself with the market, professional consultation can provide necessary context, similar to what is provided by experts in equities, stocks, or investment properties. This said, we wanted to explore a few pointers from Fine Art Experts that make art investments practical and possible.
Tip #1: Art should be bought for enjoyment first, and foremost.
Art is unlike most other forms of investments, first and foremost for its tangibility but also for its distinctive ancillary benefits, such as pride in ownership. Buying art is an adventure. It is exciting and indulges varied passions, no matter your rationale in buying one piece of art over others. A marquis painting or a sculpture can fill your life and home with beauty that one can derive day-to-day enjoyment from. The historical or aesthetic value can transcend price, making purchases truly priceless for the individual collector. Art investors almost certainly start as collectors first. Yet building a thoughtful collection takes time, research, and advice from art experts.
While the interested collector can certainly ascertain a tremendous amount of information about an individual work of art, the uniqueness of that art object can often expose issues only a professional can catch. Art authenticators, art appraisers, and art advisors all fill separate rolls in the art world which are often conflated in the eyes of the public.
Authenticators assess whether or not something is real. Appraisers provide value range often based on the purpose of the evaluation (i.e. insurance, replacement, sales, purchases, etc.). Art advisors reflect an estimate based on their knowledge of how the market actually views the item. Each of these disciplines are mutually exclusive and often take years or decades of concerted research to become proficient.
Few people attempt to be each of these things without inherent bias. So, each role is significant to each investment purchase. Art authentication can make or break the value of a work of art as much as condition reports and international title clearance reports. Works without an artist’s signature or watermark, works without a requisite certification of authenticity, or an unnumbered print in a market susceptible to fakes can plummet value as questions mount. As Art Advisors, we attempt to save our clients from the future heartbreak of buying something—especially online—without the proper certainties.
A collection is valued holistically, and a thoughtfully curated collection can be a wonderful investment for your future generations. Art prices are less-affected by macroeconomic factors such as stock prices, foreign exchange rates, inflation, etc., and are less volatile.
So when your stocks are performing poorly, your art collection could be soaring. For example, during the 2008 economic downturn, Billionaire Eli “saw his 46.6 million shares of aig–received a decade ago when he sold SunAmerica to the insurance giant for $18 billion–drop 70% between last summer and August 29, the day we priced The Forbes 400 (they’ve fallen much further since). That decline erased $2 billion from his personal balance sheet.
But Broad’s net worth fell only $300 million. One reason: the soaring value of his 2,000-piece art collection. Comprising mostly contemporary pieces by artists like Jeff Koons, his collection was recently appraised at $1.9 billion, up 72% in a year.” [Obusan, C. FORBES Magazine, 13 Oct, 2008) While we cannot all invest like Eli Broad, this makes the importance of buying art for its aesthetic value and enjoyment even more important. Additionally, the fluctuations in trends within the art market encourage wise collectors to diversify their collections with differing artists, art movements and media.
Despite the success stories of multi-million-dollar art sales populating the news, the fact is most of these blockbuster sales with huge returns on investments are far and few between. For this reason, it is important not to get caught up in the hype of the flashy sales or promises of huge rewards.
Roughly 50% of the art market is made up of auction sales, which has publicly disclosed sales figures. The other 50% is made up of a combination of private sales, gallery sales, exhibitions, online sales and other non-public sales figures. So, ultimately the public is only privy to about half of the information about Art sales, and these numbers often comprise outliers on both the high and low sides as auction buyers tend to be passion-based. Institutional investors entered the art market in the 1970s for its protections against inflation, and were followed in the next decades by art funds and art consultancies that all had varying degrees of success.
The illiquidity of art does not always produce the kind of returns many investors are looking for, prompting many to invest in traditional ways. Yet the facts show that art investing is not just for the rich. There is a work of art for every price point—and low-priced art, if purchased with the right eye and at the right time, will sometimes can outperform higher-priced art. Collectors Herbert & Dorothy Vogel, known as the “proletarian art collectors” of the 1960s, amassed a collection of over four thousand minimalist or conceptual art works by artists such as Christo, Sol LeWitt, Cindy Sherman, and Roy Lichtenstein by living frugally and devoting the husband’s meager postal worker salary to the purchase of art only. Today their collection, dispersed throughout museums, is priceless.
Knowing that Contemporary Art is the most volatile market, however the market offering the largest returns is just one of many facts an experienced art advisor can offer. Insights into “emerging markets” of art in the Middle East or other local or nationally based art movements can only be made by professionals with the expertise to judge the local markets.
An art advisor can gauge quality, rarity, and price before a buyer makes an informed purchase. Although one may know the qualities of the work, an art advisor can understand the context, the selling history, and even the timing at which a work should be sold. A good judge of quality can save you from buying a deteriorated painting, a stolen work or even a forgery—all hazards for the potential investor. By working one-on-one with an advisor, and staying informed and interested, a collector can make knowledgeable decisions that builds their collection and portfolio.
