Investment Art: A Beginner's Guide

Forget your shares portfolio - the recession-dodging art market is increasingly proving to be the most profitable place for high-stakes investment

Oscar Wilde may have been mistaken when he claimed “all art is quite useless”. A new use for art has been emerging in recent years, and it may be the most pragmatic of all – as a solid investment. In a time when stock markets are sinking, debts are rising and the looming threat of double-dip recession cannot be entirely eliminated, the art market still sporadically dazzles with record-breaking profits. The unique economic buoyancy of art has long caught the eye of not just aesthetes, but also discerning investors.

Art now falls under the category of the "SWAG" asset. The term, coined by analyst Joe Roseman of Investment Week denotes "alternate investments" which manage to defy economic gravity – namely silver, wine, art and gold.

As well as being decidedly sexier than the FTSE 100, the trend of investing in luxury assets makes a lot of economic common sense. SWAGs often outperform other equities in times of economic downturn for several logical reasons. Firstly, they benefit from the uniquely profitable principle of "scarcity economics" (their value is related to their rarity). Secondly, in an unsteady market, people are drawn to stability, and all the SWAG assets are durable – they have a historical precedence of desirability and can be bought and stored almost indefinitely. Lastly, as their returns are not related to the patterns of the stock market, they add a sensible diversity to any portfolio, the literal asset equivalent of not keeping all your eggs in one basket.

So, we’ve all been there - you’ve got a few spare million in the savings account and you can’t decide whether to invest in the Damien Hirst or the Château Lafite. Luckily, help is at hand. The art market’s unique ability to maintain a bubble of prosperity amidst a global recession has given rise to a new type of business – the art investment advisor.

Businesses of this sort were virtually unheard of a decade ago, and yet the demand  for art purely as an investment has seen a proliferation in recent years. As well as increasing numbers of private banks offering advisory services to their clients, specialist companies such as Fine Art Wealth Management and The Art Investor exist to assist buyers on making choices for bespoke portfolios which can maximise returns. Perhaps most significant in this field, however, is The Fine Art Fund. Set up just over a decade ago by Philip Hoffman, this was the first business of its type to invest in art as an asset. Currently, they manage more than $150m of assets and achieved a net annual return of 6.34 per cent over the past eight years.

Hoffman recently told the Sunday Times, “In the old days people invested in bonds, stocks and cash, and now they’re investing in ten different subject headings and art is just one of them ... People don’t look at their gold bars and, in some cases, they treat art in the same way.”

The rise of these businesses is necessary because the unregulated nature of the art market means that it still straddles an awkward line between solid economic sense and a frantic, wild gamble. On one hand, there are plenty of promising statistics: in 2011, the Financial Times reported that the art market made an 11 per cent return to its investors, a frantic outstripping of stock market return. This year, sales have been promising, with impressive prices achieved at Art Basel in June, and there is a wealth of evidence that the top end of the market has been immune to the turbulence underneath it. In fact, over half of the 20 most expensive auction sales of all time have been completed since 2008, indicating an economic buoyancy which overcomes even the recession.

So far, so lucrative. Yet, the mechanics of the art economy are governed by strange, volatile forces which means that it is never a safe bet. Charles Saatchi himself noted “Art is no investment unless you get very, very lucky” in his 2009 book My Name is Charles Saatchi and I am an Artaholic. In many ways the art market is an economist’s worst nightmare. It is wholly speculative and subjective, and therefore constitutionally unpredictable. The valuation of contemporary art, in particular, is based on a collection of changeable and changing opinions. It is constantly affected by external circumstances, and trends are capable of crashing out of fashion just as swiftly as they crashed it. Additionally, it is fundamentally impossible to confirm the value of the market as a whole. Private sales comprise approximately 75 per cent of the total market, and these are almost always undisclosed. “The art market is the most illiquid, opaque market in the world,” explained Jeff Rabin, quoted in The Art Newspaper. Given this, manoeuvring within it is always going to be a guessing game.

Other industries have, too, sprung up in reaction to the demand of fine-art investment, notably the specialist storage port. Investment art is, emphatically, not bought to be hung on the wall. Instead, collectors are increasingly storing their assets in state-of-the-art warehouses. Christies are currently expanding their "Fine Art Storage Service" due to increased demand, and new ports are due to open in Singapore and Luxenbourg, adding to existing onces in Geneva. These large-scale warehouses offer highly regulated storage controls with humidity and light protection as well as extensive on-site security. They also have a notably appeal to the money-minded collector in that they allow the temporary postponement of VAT and customs duty payments.

The implications of this are vast. Not only with regards to the valuation of art, but with an entire overhaul of its purpose. Art bought as an asset and stored, indefinitely in a warehouse, far from the damaging light of day denotes a new mode of art ownership – one where the object d’art is reduced to a purely monetary transaction.

“It’s a depressing thought,” comments Connie Viney, a London-based artist who regularly exhibits at The Vyner Street Gallery, “Just recently there was the news that Sotheby’s have once again broken their auction record by selling a Rothko for £47.3m. By all accounts, it seems that that price will just increase once again next time it’s sold. With sums like that, how can people think of art becoming anything but a get-rich-quick scheme?”

Is this the real status of art in today's world? Elite, out-priced, stored out of site and endlessly circulated in a micro-economy closed off to all but the super-wealthy? "Art for art’s sake" is a 19th century concept. "Art for the people", too, is becoming swiftly outdated. The motto for our times, it seems, is "Art for the 1 per cent".

Auctioneers place bids during the Damien Hirst's Beautiful Inside My Head Forever, at Sotheby's in 2008. (Photo by Daniel Berehulak/Getty Images)

Kamila Kocialkowska is a freelance journalist based in London.

@ms_kamila_k

 

Davide Restivo at Wikimedia Commons
Show Hide image

Scientists have finally said it: alcohol causes cancer

Enough of "linked" and "attributable": a new paper concludes that alcohol directly causes seven types of cancer.

I don't blame you if you switch off completely at the words "causes cancer". If you pay attention to certain publications, everything from sunbeds, to fish, to not getting enough sun, can all cause cancer. But this time, it's worth listening.

The journal Addiction has published a paper that makes a simple, yet startling, claim: 

"Evidence can support the judgement that alcohol causes cancer of the oropharynx [part of the throat], larynx, oesophagus, liver, colon, rectum and [female] breast"

So what's especially significant about this? 

First, scientists, unlike journalists, are very wary of the word "causes". It's hard to ever prove that one action directly led to another, rather than that both happened to occur within the same scenario. And yet Jennie Connor, author of the paper and professor in the Preventive and Social Medicine department at the University of Otago, New Zealand, has taken the leap.

Second, alcohol not only causes cancer of one kind – the evidence supports the claim that it causes cancer at seven different sites in our bodies. There was weaker evidence that it may also cause skin, prostate and pancreatic cancer, while the link between mouth cancers and alcohol consumption was the strongest. 

What did we know about alcohol and cancer before?

Many, many studies have "linked" cancer to alcohol, or argued that some cases may be "attributable" to alcohol consumption. 

This paper loooks back over a decade's worth of research into alcohol and cancer, and Connor concludes that all this evidence, taken together, proves that alcohol "increases the incidence of [cancer] in the population".

However, as Connor notes in her paper, "alcohol’s causal role is perceived to be more complex than tobacco's", partly because we still don't know exactly how alcohol causes cancer at these sites. Yet she argues that the evidence alone is enough to prove the cause, even if we don't know exactly how the "biologial mechanisms" work. 

Does this mean that drinking = cancer, then?

No. A causal link doesn't mean one thing always leads to the other. Also, cancer in these seven sites was shown to have what's called a "dose-response" relationship, which means the more you drink, the more you increase your chances of cancer.

On the bright side, scientists have also found that if you stop drinking altogether, you can reduce your chances back down again.

Are moderate drinkers off the hook?

Nope. Rather devastatingly, Connor notes that moderate drinkers bear a "considerable" portion of the cancer risk, and that targeting only heavy drinkers with alcohol risk reduction campaigns would have "limited" impact. 

What does this mean for public health? 

This is the tricky bit. In the paper, Connor points out that, given what we know about lung cancer and tobacco, the general advice is simply not to smoke. Now, a strong link proven over years of research may suggest the same about drinking, an activity society views as a bit risky but generally harmless.

Yet in 2012, it's estimated that alcohol-attributable cancers killed half a million people, which made up 5.8 per cent of cancer deaths worldwide. As we better understand the links between the two, it's possible that this proportion may turn out to be a lot higher. 

As she was doing the research, Connor commented:

"We've grown up with thinking cancer is very mysterious, we don't know what causes it and it's frightening, so to think that something as ordinary as drinking is associated with cancer I think is quite difficult."

What do we do now?

Drink less. The one semi-silver lining in the study is that the quantity of alcohol you consume has a real bearing on your risk of developing these cancers. 

On a wider scale, it looks like we need to recalibrate society's perspective on drinking. Drug campaigners have long pointed out that alcohol, while legal, is one of the most toxic and harmful drugs available  an argument that this study will bolster.

In January, England's chief medical officer Sally Davies introduced some of the strictest guidelines on alcohol consumption in the world, and later shocked a parliamentary hearing by saying that drinking could cause breast cancer.

"I would like people to take their choice knowing the issues," she told the hearing, "And do as I do when I reach for my glass of wine and think... do I want to raise my risk of breast cancer?"

Now, it's beginning to look like she was ahead of the curve. 

Barbara Speed is a technology and digital culture writer at the New Statesman and a staff writer at CityMetric.