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

 

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With the BBC Food’s collection under threat, here's how to make the most of online recipes

Do a bit of digging, trust your instincts – and always read the comments.

I don’t think John Humphrys is much of a chef. Recently, as his Today co-presenter Mishal Husain was discussing the implications of the BBC’s decision to axe its Food website (since commuted to transportation to the Good Food platform, run by its commercial arm), sharp-eared listeners heard the Humph claim that fewer recipes on the web could only be a good thing. “It would make it easier!” he bellowed in the background. “We wouldn’t have to choose between so many!”

Husain also seemed puzzled as to why anyone would need more than one recipe for spaghetti bolognese – but, as any keen cook knows, you can never have too many different takes on a dish. Just as you wouldn’t want to get all your news from a single source, it would be a sad thing to eat the same bolognese for the rest of your life. Sometimes only a molto autentico version, as laid down by a fierce Italian donna, rich with tradition and chopped liver, will do – and sometimes, though you would never admit it in a national magazine, you crave the comfort of your mum’s spag bol with grated cheddar.

The world wouldn’t starve without BBC Food’s collection but, given that an online search for “spaghetti bolognese recipe” turns up about a million results, it would have been sad to have lost one of the internet’s more trustworthy sources of information. As someone who spends a large part of each week researching and testing recipes, I can assure you that genuinely reliable ones are rarer than decent chips after closing time. But although it is certainly the only place you’ll find the Most Haunted host Yvette Fielding’s kedgeree alongside Heston Blumenthal’s snail porridge, the BBC website is not the only one that is worth your time.

The good thing about newspaper, magazine and other commercial platforms is that most still have just enough budget to ensure that their recipes will have been made at least twice – once by the writer and once for the accompanying photographs – though sadly the days when everyone employed an independent recipe tester are long gone. Such sites also often have sufficient traffic to generate a useful volume of comments. I never make a recipe without scrolling down to see what other people have said about it. Get past the “Can’t wait to make this!” brigade; ignore the annoying people who swap baked beans for lentils and then complain, “This is nothing like dhal”; and there’s usually some sensible advice in there, too.

But what about when you leave the safety of the big boys and venture into the no man’s land of the personal blog? How do you separate the wheat from the chaff and find a recipe that actually works? You can often tell how much work a writer has put in by the level of detail they go into: if they have indicated how many people it serves, or where to find unusual ingredients, suggested possible tweaks and credited their original sources, they have probably made the dish more than once. The photography is another handy clue. You don’t have to be Annie Leibovitz to provide a good idea of what the finished dish ought to look like.

Do a bit of digging as part of your prep. If you like the look of the rest of the site, the author’s tastes will probably chime with your own. And always, always, wherever the recipe is from, read it all the way through, even before you order the shopping. There is nothing more annoying than getting halfway through and then realising that you need a hand blender to finish the dish, just as the first guest arrives.

Above all, trust your instincts. If the cooking time seems far too short, or the salt content ridiculously high, it probably is, so keep an eye on that oven, check that casserole, keep tasting that sauce. As someone who once published a magic mince pie recipe without any sugar, I’m living proof that, occasionally, even the very best of us make mistakes. 

Felicity Cloake is the New Statesman’s food columnist. Her latest book is The A-Z of Eating: a Flavour Map for Adventurous Cooks.

This article first appeared in the 26 May 2016 issue of the New Statesman, The Brexit odd squad