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

 

Show Hide image

The film for The Lost City of Z was flown back from the jungle – and it was worth it

Based on David Grann’s book about the British explorer Percy Fawcett, the film is a beautiful, diligent portrait. Plus: Aquarius.​

Two ravishing new films with a Brazilian flavour are generous not only in length (two and a half hours apiece) but in wisdom and wonder. The Lost City of Z is based on David Grann’s book about the British explorer Percy Fawcett, who embarked in 1906 on a Royal Geographical Society expedition, only to become entranced by the legend of an advanced Amazonian civilisation. Fawcett (Charlie Hunnam, delivering his lines in a mesmerising whisper) is drawn repeatedly to the jungle with his aide-de-camp, Henry (Robert Pattinson), interrupting these quests only to fight on the Somme or to return to England to impregnate his patient wife, Nina (Sienna Miller).

Fawcett raises hackles by arguing against the characterisation of the indigenous people as savages and the film repeats this democracy of spirit visually, making no distinction in mystique and allure between the various locations. Devon looks as delicious as Bolivia or Brazil; the mood in the wood-panelled conference room where Fawcett is reprimanded for abandoning one of his party is as treacherous as the depths of the jungle. This creates a continuity between the various worlds, rather than making one exotic at the expense of the other.

James Gray, who writes and directs, retains the unfashionable preference for film over digital which has defined his previous work (moody, mumbly dramas such as We Own the Night and Two Lovers). The picture was shot by Darius Khondji on 35mm, even though that added over half a million dollars to the budget and meant the footage had to be flown thousands of miles from the Colombian rainforest locations to be processed. It was worth it. The dense colours are soaked deep into the grain of the filmstock. They tell a story not available in pixels.

Gray’s screenplay weighs Fawcett’s bravery against his intolerance of ­fallibility, his racial progressiveness against the short-sightedness of his sexual politics. When Nina asks to accompany him, it’s more than he can stomach. “Men and women have performed their roles since the beginning of time,” he fumes. All at once a man fighting social orthodoxy takes cover beneath its privileges. Nina is framed against the tangled blue flowers of the wallpaper; that’s the closest she will get to his adventures. And yet it is she who invokes Browning’s “Andrea del Sarto” to urge her husband on: “Ah, but a man’s reach should exceed his grasp,/Or what’s a heaven for?”

The diligent direction hints that Gray was aiming for the level of scrutiny found in Barry Lyndon, an impression supported by a talismanic cameo from Murray Melvin, who starred in Kubrick’s 1975 film. Barry Lyndon pops up, too, in Aquarius: the distinguished music writer Clara (the incredible Sônia Braga) has a poster for the movie in her Recife apartment. She lives alone but not lonely, visited by her adult children and attended to by a long-serving maid, Ladjane (Zoraide Coleto). A more unwelcome interruption comes in the shape of the property developers who want Clara, the last ­resident in her block, to sell up and move out.

We already know she is formidable. She wears her mastectomy scars defiantly, and the opening scene establishes that her anthem is Queen’s “Another One Bites the Dust”. With her black hair scraped severely into a bun, and her lips on the verge of a wicked laugh or a vinegary screw-you sneer, Clara is a tenacious warrior. Yet in these businessmen who hide their desires behind tight smiles and veiled threats, she may have met her match.

Aquarius is a leisurely character study that is also urgently political in its treatment of race, class and commerce. Its Brazilian director, Kleber Mendonça Filho, who started out as a critic, has a gift for translating psychological states into cinematic language. His
use of dissolves is haunting, his placement of figures in the frame expressive, and his zooms make you swoon. No detail escapes his eye, from restless feet jiggling under the table on a girls’ night out to strands of hair caressed by the breeze at a late-night party.

The film’s main symbol is a chest of drawers, crammed with layers of memory to which only we have been given access. It represents the sort of history that is in danger of being trampled by people who believe every principle has a price tag. The beach outside warns of shark attacks but the deadliest predators come in human form.

Ryan Gilbey is the New Statesman's film critic. He is also the author of It Don't Worry Me (Faber), about 1970s US cinema, and a study of Groundhog Day in the "Modern Classics" series (BFI Publishing). He was named reviewer of the year in the 2007 Press Gazette awards.

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