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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Limehouse raises the question of when party loyalty becomes political irresponsibility

Labour's “Gang of Four” are brought to life brilliantly at the Donmar Warehouse.

A star of the Labour Party right wing, exiled from the shadow cabinet for deviating from the dominant orthodoxy, rants about how a decent but weak Labour leader, with an election-losing anti-European, anti-nuclear manifesto, risks letting the prime minister get away with whatever she wants.

Laughter shows that the audience gets what the dramatist Steve Waters is up to. Limehouse takes place on 25 January 1981, when a gentle veteran, Michael Foot, seems to be leading Labour to such sure oblivion at the next election that Dr David Owen has summoned his fellow moderates Shirley Williams, Bill Rodgers and (just back from a stint running Europe) Roy Jenkins to Sunday lunch in his kitchen in east London. This meeting led the “Gang of Four”, as they became known, to make a statement of estrangement from Labour that heralded the creation of the Social Democratic Party.

Waters was inspired by a New Statesman interview in which Rodgers wondered if the left-right divide under Jeremy Corbyn might justify a similar evacuation of the pragmatists now. The debates that the play stages – fidelity to party and national tribes against a fear of political and historical irrelevance – feel hotly topical.

Williams, considering an offer to abandon Labour and teach at Harvard, faced then the dilemma of an Ed Balls or Tristram Hunt now. And Labour members today who fantasise about a new progressive grouping might reflect that, while the SDP briefly seemed a plausible alternative to Thatcherism (winning 7.8 million votes at the 1983 election), the middle-class revolution was squeezed externally by two-party domination and internally by disputes over leadership and direction.

But, for all the parallel relevance, the success of Limehouse ultimately depends on the convincing re-creation of an era and its people. Enjoyable period details include the luxury macaroni cheese to a recipe by Delia Smith that Debbie Owen, Delia’s literary agent, chops and fries on stage to fuel her husband’s discussions with his three wary comrades. Waters also skilfully uses the mechanics of a pre-digital world – having to go out for newspapers, going upstairs to answer a phone – to get one character out of the way to allow others to talk about them.

As a good playwright should, Waters votes for each character in turn. Owen, though teased for vanity and temper, is allowed a long speech that honours his status as one of the most memorable orators in modern British politics. Tom Goodman-Hill samples Owen’s confident baritone without going the whole Rory Bremner.

Playing Jenkins, a man celebrated for both a speech defect and rococo cadences, Roger Allam has no choice but to deliver the voice perfectly, which he does. Waters carefully gives the character an early riff about the “crepuscular greyness” of Brussels, allowing Allam to establish the w-sounds and extravagant adjectives. Actor and playwright also challenge the assumption that for Jenkins both to love fine wine and to advocate social justice was inevitably a contradiction.

Debra Gillett refreshingly avoids the scattiness that caricaturists attribute to Williams, stressing instead her large brain and deep soul, in a portrayal that increases the sense of shame that the Tories should lead Labour 2-0 in the score of female prime ministers. As Rodgers (in Beatles terms, the Ringo of the confab four), Paul Chahidi touchingly suggests a politician who knows that he will always be a bag-man but still agonises over whose luggage to carry.

Unfolding over 100 minutes, Polly Findlay’s production has a lovely rhythm, staging the delayed entrances of Jenkins and Williams for maximum impact. Biodramas about the living or recently dead can be hobbled by a need to negotiate objections of tact or fact. Politicians, however, often purchase even the rudest cartoons of themselves for the loo wall, and the real Owen, Williams and Rodgers laughed warmly during, and strongly applauded after, the first night.

At an impromptu press conference afterwards, a genial and generous Owen astutely observed that what at the time was “a very happy day in our house” has been dramatised as tragicomedy. But, regardless of whether Marx was right about history repeating itself the second time as farce, the possibility that farce is being repeated in Labour Party history has encouraged a compelling play that is sublimely enjoyable but also deeply serious – on the question of when loyalty to party can become disloyalty to political responsibility.

“Limehouse” runs until 15 April

Mark Lawson is a journalist and broadcaster, best known for presenting Front Row on Radio 4 for 16 years. He writes a weekly column in the critics section of the New Statesman.

This article first appeared in the 23 March 2017 issue of the New Statesman, Trump's permanent revolution