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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On the trail of Keith Jarrett's melodies

Lose focus for a second and you can quickly drop the thread of Jarrett's complex improvisational techniques.

“So, this is a piano,” said Keith Jarrett, sitting down at the one that had been placed centre stage for him in the Royal Festival Hall on 20 November. Blowing on his hands to warm them, he acted as if he had never encountered such an instrument before, raising a chuckle from the hundreds of fans who had turned out to see the man in the flesh. For 40 years, Jarrett has been giving concerts like this – alone with the piano, playing his improvised music to a room full of rapt devotees. Notoriously grumpy – and now as well known for his tirades against cameras and coughing audience members as for his early days playing with Miles Davis – he has an almost eerie focus onstage, relieving the tension only very occasionally with his barbed observations about the excellence of the instrument, or the shuffling in the auditorium.

Jarrett gave us a series of short pieces, each rendering separate and distinctive musical ideas. He began with an intricately woven flash of notes in both hands, criss-crossing the melodies that were by turns dark and haunting, or light and dancing. At particularly complex moments, when his arms were crossed over and the notes were flowing from his fingers faster than anyone could imagine them into existence, he leaned his ear down towards the keys, as if physical closeness could help his ideas more swiftly become sound.

A couple of folk-inflected ballads followed; heart-achingly sweet melodies picked out above rumbling, sour arpeggios. Like Glenn Gould, the Canadian pianist best known for his recordings of Bach’s Goldberg Variations, Jarrett can’t help adding vocalisations as he plays, which are all the more evident in his quieter compositions. He rose and fell from his stool; we heard his guiding hum along with the melody, as well as the odd strangled shout, yelp and grunt. He might insist on absolute silence from the audience but his own noises seem completely uninhibited as the music spins around him.

Although notorious for his curmudgeonly attitude to his fans, Jarrett was mostly restrained in this outing, allowing himself just one short, sweary outburst about killing a “f***ing camera”. At the age of 70 and with the power to sell out his concerts in just a few hours, you do wonder how much of the persona is genuine and how much of it is just giving the audience what it expects. A case in point came near the end, when he yielded to clamouring and gave a surprisingly simple and straightforward rendition of “Danny Boy”, an encore that long-time fans know well.

Given that this recital was under the auspices of the London Jazz Festival, there was surprisingly little in Jarrett’s programme that could easily be identified as jazz. One piece, full of brisk rhythms and chunky chords, gradually revealed itself to be based on a modified 12-bar blues structure and another had haunting overtones surely pulled from the classic American songs of the first half of the 20th century. Indeed, this musical ghosting becomes a major preoccupation when you see Jarrett live. It is too easy to distract yourself in trying to follow the auditory trail he has laid for you – was that a bit of Debussy, or Bach, or Glass just then? – and lose the thread of what he plays next. The improvisational technique might have more in common with jazz but now, 40 years on from his bestselling live recording The Köln Concert, it’s difficult to characterise Jarrett’s output as anything other than contemporary classical music.

If it needs a classification, that is. At one point, I became convinced that a particular piece was a Jarrett riff on Beethoven’s Bagatelle No 25 in A Minor – or Für Elise, as it is more commonly known. I was sure it was all there: the extended opening trill, the rising arpeggios in the left hand, the melody cascading from treble to bass and back again. Except, by the time I surfaced from my musing, there was no trace of Beethoven to be heard. A clashing, almost violent melody was dangling over a long drone in the bass. If you try too hard to pin down Jarrett’s music, it moves on without you.

Caroline Crampton is web editor of the New Statesman.

This article first appeared in the 26 November 2015 issue of the New Statesman, Terror vs the State