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

 

Peter Kay's Car Share. BBC
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Peter Kay's Car Share will restore your faith in human beings

 I clutch at John and Kayleigh's potential for happiness as if at straws. 

I discovered Peter Kay’s Car Share about a year ago, by accident. BBC News at Ten had finished and there we were, slumped in our seats, despondent, unable to move. It came on, by my memory, immediately afterwards, and we zombies stared at it unthinkingly at first, unaware that we were in the presence of greatness. But it didn’t take long for the penny to drop and we’ve been obsessed ever since. A year on a, I am convinced – forgive the mild pomposity – that this is one of the most inspired and culturally significant television shows of our age.

Have you seen it? Perhaps you have: the first series, which was originally broadcast in 2015, won a couple of Baftas and was the most popular “box set” ever to be released on BBC iPlayer. The second – too short – series (Tuesdays, 9pm) concludes on BBC1 on 2 May. If you haven’t seen it, you need to. For one thing, it will make you smile. It is very funny, but it is also tender; its unstated subject being kindness, it has the ability briefly to restore one’s faith in human beings.

For another, it is rooted in provincial reality in a way no other television programme is right now. Try as I might to resist using the words “metropolitan bubble”, I can’t help but feel that those columnists who persist, post-Brexit vote, in trotting out every demeaning cliché it’s possible to imagine about the north and its apparently uniform population of “ordinary people” should be force-fed it. What Kay and his co-writers understand better than they do is that no one is “ordinary”. Every life comes with its kinks and idiosyncrasies, its survival mechanisms, its share of demented dreams.

John (Kay) and Kayleigh (Sian Gibson, utterly endearing and giving the performance of a lifetime) work in a supermarket somewhere in the environs of Bolton. He’s management; she works on the shopfloor in promotions. They share a car – he drives – to and from work. In the first series, this was an arrangement they had reached reluctantly, as a result of a work-sanctioned scheme. In the second, they’re doing it by choice. In short, they love each other, though as yet this is unspoken, at least on his part. As they travel, they listen to a cheesy radio station, Forever FM, which plays old hits, mostly from the 1980s (they’re in their forties, so this suits). Meanwhile, the world goes by: traffic jams and roundabouts, out-of-town superstores and suburban cul-de-sacs. It sounds bleak, and perhaps it is, in a way. You can’t ever see the horizon. But it’s summer, and the evenings are long, and everything is suffused with a soft light. Somehow, it takes you back.

They sing, they gossip, they tease, they reminisce, they laugh at one another’s jokes, and sometimes they have small battles, miniature fallings-out. In one episode – the finest of them all so far – they go to their work party dressed as Harry Potter (him) and Hagrid (her) and return home in the company of a Smurfette, also known as Elsie from the deli counter (a comic turn of cast-iron genius by Conleth Hill, the classical actor currently playing George in Who’s Afraid of Virginia Woolf? in the West End of London).

Less accomplished writers than Kay, Gibson and Paul Coleman would have had the trio making gags about her blue face paint or singing the annoying Smurfs theme. But the show being truly brilliant, for the next 20 minutes no one mentions that there’s a huge, flirtatious Smurfette with a Northern Irish accent and an air that is at once vulnerable and slightly menacing in the front seat of John’s red Mini.

In this episode, loneliness – another of the themes in this series – threatens to rise up out of the drunken, early-hours darkness. But in the end they send it on its way. John and Kayleigh roll their eyes at Elsie’s vulgar antics but ultimately they’re glad of her, just as they’re glad of each other. John is a man who draws his neighbours’ curtains for them while they’re away; Kayleigh is a woman who can squeeze intense pleasure from almost anything, up to and including a two-for-one offer on tickets for a moderately rubbish safari park. I want them to be together so much. I clutch at their potential for happiness as if at straws. 

Rachel Cooke trained as a reporter on The Sunday Times. She is now a writer at The Observer. In the 2006 British Press Awards, she was named Interviewer of the Year.

This article first appeared in the 27 April 2017 issue of the New Statesman, Cool Britannia 20 Years On

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