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.



Screenshot of Black Mirror's Fifteen Million Merits.
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How likely are the plots of each Black Mirror episode to happen?

As the third series is on its way, how realistic is each instalment so far of the techno-dystopian drama? We rate the plausibility of every episode.

What if horses could vote? What if wars were fought using Snapchat? What if eggs were cyber?

Just some of the questions that presumably won’t be answered in the new series of Charlie Brooker’s dystopian anthology series Black Mirror, somewhere between The Twilight Zone with an app and The Thick Of It on acid.

A typical instalment takes an aspect of modern technology, politics, or life in general and pushes it a few steps into the future – but just how plausible has each episode been so far?

Series 1 (2011)

Episode 1: The National Anthem

Premise: A member of the Royal Family is kidnapped and will only be released unharmed if the Prime Minister agrees to have sexual intercourse with a pig on live television.

Instead of predicting the future, Black Mirror’s first episode unwittingly managed to foreshadow an allegation about the past: Charlie Brooker says at the time he was unaware of the story surrounding David Cameron and a pig-based activity that occurred at Oxford university. But there’s absolutely no evidence that the Cameron story is true, and real political kidnappings tend to have rather more prosaic goals. On the other hand, it’s hard to say that something akin to the events portrayed could NEVER happen.

Plausibility rating: 2 out of 5

Episode 2: Fifteen Million Merits

Premise: Sometime in the future, most of the population is forced to earn money by pedalling bikes to generate electricity, while constantly surrounded by unskippable adverts. The only hope of escape is winning an X-Factor-style game show.

In 2012, a Brazilian prison announced an innovative method of combating overcrowding. Prisoners were given the option to spend some of their time on electricity-producing bikes; for every 16 hours they spent on the bike, a day would be knocked off their sentence.

The first step to bicycle-dystopia? Probably not. The amount of electricity a human body can produce through pedalling (or any other way, for that matter) is pretty negligible, especially when you take account of the cost of the food you’d have to eat to have enough energy to pedal all day. Maybe the bike thing is a sort of metaphor. Who can say?

Plausibility rating: 0 out of 5

Episode 3: The Entire History of You

Premise: Everyone has a device implanted in their heads that records everything that happens to them and allows them to replay those recordings at will.

Google Glasses with a built-in camera didn’t work out, because no one wanted to walk around looking like a creepy berk. But the less visibly creepy version is coming; Samsung patented “smart” contact lenses with a built-in camera earlier this year.

And there are already social networks and even specialised apps that are packaging up slices of our online past and yelling them at us regardless of whether we even want them: Four years ago you took this video of a duck! Remember when you became Facebook friends with that guy from your old work who got fired for stealing paper? Look at this photo of the very last time you experienced true happiness!

Plausibility rating: 5 out of 5

Series 2 (2013)

Episode 1: Be Right Back

Premise: A new service is created that enables an artificial “resurrection” of the dead via their social media posts and email. You can even connect it to a robot, which you can then kiss.

Last year, Eugenia Kuyda, an AI entrepreneur, was grieving for her best friend and hit upon the idea of feeding his old text messages into one of her company’s neural network-based chat bots, so that she and others could, in a way, continue to talk to him. Reaction to this was, unsurprisingly, mixed – this very episode was cited by those who were disturbed by the tribute. Even the robot bit might not be that far off, if that bloke who made the creepy Scarlett Johansson android has anything to say about it.

Plausibility rating: 4 out of 5

Episode 2: White Bear

Premise: A combination of mind-wiping technology and an elaborately staged series of fake events are used to punish criminals by repeatedly giving them an experience that will make them feel like their own victims did.

There is some evidence that it could be possible to selectively erase memories using a combination of drugs and other therapies, but would this ever be used as part of a bizarre criminal punishment? Well, this kind of “fit the crime” penalty is not totally unheard of – judges in America have been to known to force slum landlords to live in their own rental properties, for example. But, as presented here, it seems a bit elaborate and expensive to work at any kind of scale.

Plausibility rating: 1 out of 5

Episode 3: The Waldo Moment

Premise: A cartoon bear stands as an MP.

This just couldn’t happen, without major and deeply unlikely changes to UK election law. Possibly the closest literal parallel in the UK was when Hartlepool FC’s mascot H'Angus the Monkey stood for, and was elected, mayor – although the bloke inside, Stuart Drummond, ran under his own name and immediately disassociated himself from the H’Angus brand to become a serious and fairly popular mayor.

There are no other parallels with grotesque politicians who may as well be cartoon characters getting close to high political office. None.

Plausibility rating: 0 out of 5

Christmas special (2015)

Episode: White Christmas

Premise 1: Everyone has a device implanted in their eyes that gives them constant internet access. One application of this is to secretly get live dating/pick-up artistry advice.

As with “The Entire History of You”, there’s nothing particularly unfeasible about the underlying technology here. There’s already an app called Relationup that offers live chat with “relationship advisers” who can help you get through a date; another called Jyst claims to have solved the problem by allowing users to get romantic advice from a community of anonymous users. Or you could, you know, just smile and ask them about themselves.

Plausibility rating: 4 out of 5

Premise 2: Human personalities can be copied into electronic devices. These copies then have their spirits crushed and are forced to become the ultimate personalised version of Siri, running your life to your exact tastes.

The Blue Brain Project research group last year announced they’d modelled a small bit of rat brain as a stepping stone to a full simulation of the human brain, so, we’re getting there.

But even if it is theoretically possible, using an entire human personality to make sure your toast is always the right shade of brown seems like overkill. What about the risk of leaving your life in the hands of a severely traumatised version of yourself? What if that bathwater at “just the right” temperature turns out to be scalding hot because the digital you didn’t crack in quite the right way?

Plausibility rating: 1 out of 5

Premise 3: There’s a real-life equivalent of a social media block: once blocked, you can’t see or hear the person who has blocked you. This can also be used as a criminal punishment and people classed as sex offenders are automatically blocked by everyone.

Again, the technology involved is not outrageous. But even if you have not worried about the direct effect of such a powerful form of social isolation on the mental health of criminals, letting them wander around freely in this state is likely to have fairly unfortunate consequences, sooner or later. It’s almost as if it’s just a powerful image to end a TV drama on, rather than a feasible policy suggestion.

Plausibility rating: 2 out of 5

Series 3 of Black Mirror is out on Friday 21 October on Netflix.