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.

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Will they, won't they: Freya’s ambivalent relationship with plot

Like the heroine, the narrative feels becalmed and slightly wrong-footed in Anthony Quinn’s Freya.

Freya is a portrait of a young woman in her time (post-Second World War through to the 1950s), place (London and Oxford) and social class (upper middle). Her father is an artist, Stephen Wyley, one of the principal characters in Anthony Quinn’s last novel, Curtain Call, which was set in 1936. We meet Freya on VE Day, assessing her own reflection: dressed in her Wren uniform, leggy, a little flat-chested, hollow-cheeked, with a “wilful” set to her mouth. And even though her consciousness is the constant centre of this novel, the feeling that we are standing outside her and looking in is never quite shaken. Quinn invests intensively in the details of the character’s life – the food and drink, the brand names and the fabrics, the music and the books around her – but he can’t always make her behave plausibly in the service of the story.

In fact, the novel has an altogether ambivalent relationship with plot. For the first two-thirds of the book there’s not that much of it. Freya is one of those young women for whom peacetime brought a tedious reversion to the mean expectations for her sex. When she goes up to Oxford, she realises that, despite her accomplishments in the navy, “she was just a skirt with a library book”. Like the heroine, the narrative feels becalmed and slightly wrong-footed. Quinn makes heavy use of elision – telling us that something is about to happen and then jumping to the aftermath – which would be an effective way to suggest Freya’s frustration, if it weren’t so schematic.

Granted, it’s preferable to dodge the obvious than to have it hammered home, but at times Quinn can be remarkably unsubtle. When a character mentions a fictional writer, he glosses this immediately afterwards, explaining: “He had named a famous man of letters from the early part of the century.” Presumably this clunking line has been inserted for fear that we readers won’t be able to draw the necessary conclusions for ourselves, but it’s superfluous and it jars. Quinn also has his characters make self-conscious asides about literature. Arch observations such as “The writer should perform a kind of disappearing act” and “It’s unfathomable to me how someone who’s read Middlemarch could behave this way” make me wonder whether students of physics might not have more intriguing inner lives than those studying English literature.

And then there is Freya’s sexuality, which is set up as the animating mystery of the novel, but is laid out quite clearly before we’re a dozen pages in. She meets Nancy Holdaway during the VE celebrations and the attraction is instant, though also unspeakable (a critical plot point hinges on the repression of homosexuality in 1950s Britain). The will-they-won’t-they dance extends through the book, but it’s hard going waiting for the characters to acknow­ledge something that is perfectly obvious to the reader for several hundred pages. It’s not as if Freya is a fretful naif, either. She takes sexual opportunity at an easy clip, and we learn later that she had flirtations with women during the war. Why become coy in this one instance?

Nor is she otherwise a reserved or taciturn character. Forging a career in journalism as a woman demands that she battle at every step, whether she would like to or not. “But I don’t want to fight,” she says, later on in the narrative, “I only want to be given the same.” However, she rarely backs away from confrontation. At times her tenacity is inexplicable. In one scene, she is about to pull off a decisive bargain with a figure from the underworld when she defies the middleman’s warnings and launches into a denunciation of her criminal companion’s morals, inevitably trashing the deal. It’s hard to swallow, and makes it harder still to imagine her keeping her counsel about the great love of her life.

When the plot at last springs to life, in the final third, there is almost too much to get through. Quinn introduces several new characters and a whole mystery element, all in the last 150 pages, with the romance still to be resolved besides. After the languorous pace so far, it’s an abrupt and not quite successful switch. Quinn hasn’t got the Sarah Waters trick of mixing sexual repression with a potboiling historical plot, nor Waters’s gift for scenes of disarming literary filth. (Freya announcing that “she finger-fucked me till I came” is unlikely to join ­Fingersmith’s “You pearl!” in the fantasy lives of the bookish.) Freya is a novel about intimacy and honesty, where telling the truth is paramount; but it doesn’t seem to know its own heroine well enough to bring us truly close to her.

Sarah Ditum is a journalist who writes regularly for the Guardian, New Statesman and others. Her website is here.

This article first appeared in the 28 April 2016 issue of the New Statesman, The new fascism