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

 

Photo: Getty
Show Hide image

Winning tears: Chad Le Clos is a great swimmer, but his display of emotion shows real strength

The South African Olympian and his parents offer something we rarely see.

Headlines from the swimming world championships might well have been stolen by Adam Peaty’s world records and golds, but Chad Le Clos’s reaction to winning the 200m freestyle last night had a victory all of its own.

South African Le Clos was visibly moved to tears during the awards ceremony, unafraid to appear emotional after having left the world’s best in his wake. His parents Bert and Geraldine were also filmed wiping away tears in the stands.

Bert had already gone viral at the 2012 Olympics in a BBC interview with Claire Balding, during which he described his son as “the most down-to-earth, beautiful boy you’ll ever meet in your life”. If “beautiful” doesn’t quite chime with expectations of a chiselled, Adonis-like athlete like Le Clos, perhaps even more refreshing was Bert blowing his son a kiss from the commentary perch, saying through the TV: “I love you”.

Last night’s tears were all the more emotional given both Bert and Geraldine are receiving treatment for cancer. It was something weighing on Le Clos, who said that it was “an emotional race, before, during and after it".

Men being so openly affectionate in public is still rare. But it comes during a week in which ITV aired Diana, Our Mother: Her Life and Legacy, with Princes William and Harry talking about their love of their mother.

When interviewed before the programme, William said: “I think it's been quite cathartic for us doing it. It's been at first quite daunting – opening up so much to camera... but going through this process has been quite a healing process as well."

The Le Clos family might be leagues away from the upper reaches of fame occupied by the Princes, but they both speak to something wider – that it is perfectly fine for men to be emotional, either in times of triumph or of difficulty.

Jack Urwin made the point for Vice and, later, in his book Man Up: Surviving Modern Masculinity, that “the stubborn lost-husband-refusing-to-ask-for-directions might be a handy caricature – one that's helped people like Martin Clunes sustain a career in television for over 30 years – but it's also rooted in a very real, very destructive notion of masculinity. We're conditioned from an early age to believe that acknowledging weakness is somehow a weakness in itself.”

It is relevant when considering that suicide is the leading cause of death in 20 to 34-year-old men in the UK. The epidemic of young male suicide in the UK cannot be simplified as having one defining cause, or one defining solution. But preventing male suicide and being more willing to accept very natural male tears, are two concepts which stem from the same roots: expression, communication, and destigmatising emotion.

The emotion shown by the Le Clos men is not, however, born out of difficulty – it is born out of happiness and, at the risk of being trite, love. “The Le Clos only cry when we win,” Bert told Sport24 after the Olympics. “We don't cry when we lose and that's the bottom line.”

The reality is that everyone loses as often, if not more often, than they win. Yet in being so willing to display their love for each other, the Le Clos men continue to set a bold precedent. Any criticisms of a snowflake generation, or even predictably crass tweets citing Dunkirk as evidence of 21st century men’s weakness, are spectacularly missing the point.

Yes, Chad Le Clos’s performance in the Budapest pool was muscular, powerful and dominant – but in his tears and his admission that his “family's health is more important than gold medals," he showed another form of strength.