Investing in Art – It’s An Oxymoron

Investing in Art – It’s An Oxymoron

Unless You’ve Got Money To Burn, Buy Art Because You Like It – Or The Artist

One of these pictures is a Monet. The other is a Manet. If you can’t tell which is which, investing in art is probably not for you.

And even if you can (and by the way, that’s the Monet on the right), unless you’ve got some millions of pounds of discretionary funds available for the purpose, you can’t buy either of them. There’s a different Monet – an obscure beach scene known as ‘De Voorzan’ (circa 1871) – currently up for sale at a gallery in New Orleans with a sticker price of $1,885,000 (£1,177,560). Presumably it’s negotiable.

Art Is Everywhere – And Nowhere

Of course, art investments are not by any means defined by or confined to the works of 19th Century impressionists. Art is nothing if not universal. Which is the dilemma for the would-be investor. If a work of art – be it painted or sculpted or done with a squeegee (and we’ll come back to that) – has acquired truly international appeal, the chances are that its value, meaning the price you’d have to pay to buy it, has gone stratospheric. Conversely, if a given work of art has no or precious few admirers, you can probably buy it for next to nothing – because essentially that’s what it’s worth as an investment.

History is replete with examples of artists whose genius went unremarked during their lifetimes yet whose works today command millions of pounds, if they can be bought at all. Vincent van Gogh is very much the case in point. But for every van Gogh, of course, there are the legions of artists who possessed talent, and perhaps acquired some sort of following during their lifetime, but whose work has not endured beyond their passing and has little or no value today.

In The Unlikeliest of Places

Then there are art styles which define periods or peoples that no longer exist but which may yet see a resurgence in a different context. Take socialist realism, the officially-sanctioned – and imposed – artistic style of the Soviet Union and elsewhere in the communist world through much of the 20th Century. The works of Isaak Brodsky, for example, or Nikolai Timkov had little commercial appeal in the western world during their lifetimes – to own one would be to label oneself a Red, or at least a sympathiser – yet their artistry is being freshly assessed, and valued, in the post-communist world.

When the Guggenheim Museum in New York should hold – as it’s doing right now – a ‘Russia’ exhibition, featuring Brodsky’s brilliant seminal study of V. I. Lenin, you can take it that Soviet-era art has come out from behind a long-since rusted Iron Curtain smack into the heart of capitalism. And incidentally, back in 2009, a pre-communism work of Brodsky – a lovely Monet-style oil of nannies with their charges in a flower-strewn field and dating from 1912 – sold at Sotheby’s in London for £937,250, nearly three times its pre-auction estimate.

Getting It Right

Whether it’s Socialist Realism or Contemporary Middle Eastern or Fronte Nuovo delle Arti, or Fauvism or Futurism, or any of the other 200 or so art styles, genres, schools and movements known to Mankind, if one is to be serious about the intention to invest in art, the trick is surely for one to have the knowledge and the nous to pick future trends – and specific artists – before they enter the mainstream. Once there, the market takes over and market prices are to be paid. Whereas the canny eye looking for an art investment should aim to pay pre-market prices, because there is no or only a poorly-formed market, and to reap market-driven returns at favourable times in the future.For an illustration of the art of art investment, we may surely look to Eric Clapton – an artist of another kind – and his recent sale at auction of a Gerhard Richter abstract. As reported by The Telegraph on 15 October, the 1993 work – one of many Richter has produced with a squeegee and a good deal of vividly-coloured paint, from the series ‘Abstraktes Bild’ – sold for £21.3 million, making it the highest price yet paid for the work of a living artist. Clapton reportedly bought it a decade ago for a tenth of that price. As art investments go that has to be considered a winner.

The Richter Effect

And Richter – a German now into his 80s but by all accounts still going strong – is surely the archetypical ‘find’ for art investors. Born in 1932 in Dresden, destined to become part of the German Democratic Republic after World War II, Richter would have been of the Socialist Realism school except for the fact of his defection to the West, shortly before such moves were rendered moot by construction of the Berlin Wall. Instead he and other similarly-placed German artists set up the ‘Kapitalistischer Realismus’ – you guessed it, the Capitalist Realism – school.

And in the ensuing 40-odd years, Richter has produced prolifically across a wide range of artistic styles and media. Many hundreds of his works are in museums, galleries – and circulation – around the world. In March this year, Reuters’ staffer Felix Salmon wrote bitingly of ‘The commodification of Gerhard Richter’, observing that the artist has no fewer than 545 works recorded in artnet.com’s database as having sold for more than $100,000 at auction. Velasquez, by contrast, has just three.

Richter was of course well-known in his native Germany – and more widely – for many years before his ascendancy to international art world superstardom. Although already able to command the £2 million reputedly paid by Eric Clapton 10 years ago, his fame really took off with a series of exhibitions mid-decade. Since then, Richters of various ilks have become the must-have trophy art of the world’s uber-rich, from Arabian oil princes to Russian oligarchs to widowed American billionairesses.

Is Richter Mature Or Just Aging?

Applying our litmus test for successful art investment – buying in the absence of or in a poorly-formed market and selling at its height – it seems that Eric Clapton got it right. Using the useful calculator at measuringworth.com, an outlay of £2 million in 2002 money terms is worth somewhere between £2.4 and £2.7 million today. Let’s take the higher end of the range: £2.7 million invested at compound interest of, say, 10 percent for 10 years gets you around £7 million. Clapton’s investment in Gerhard Richter has trebled that. Of course, the auction house doubtless took a big bite out of the purchase price but isn’t it ever so, with investments of all kinds, that the ticket gets clipped by needed interlopers. The performance of this particular art investment is none the worse for that.

And also of course, £2.7 million could hardly be called an investment in a ‘poorly-formed’ market, whatever the commodity. But relative to the value of that Richter some 10 years later, it plainly was. A pertinent question – one to which the most recent buyer no doubt gave a good deal of thought before bidding – is whether ‘the Richter market’ has now matured or whether, in another decade, that very same splotch of vividity will be fetching £200 million at Sotheby’s.It seems scarcely imaginable, yet that is the sort of price escalation which the art investment market has bestowed on the works of this one artist. And a living artist to boot. Who knows what the market will make of his passage into immortality, a happening which – given he’s now octogenarian – is on the event horizon? In June last year, acclaimed – to millions venerated – Indian artist M F Husain died at the age of 95. In August this year, the Economic Times of India reported that sales of his works were fetching prices 50 percent higher than at the time of his death, outstripping by far the performance of all other investment products over that period.

Art Investments – Beyond The Market

Both Richter and Husain are artists whose fame and popular appeal have transcended national borders, a phenomenon which has undoubtedly contributed much to the value placed on their work. In this respect, they share the beginnings of common ground with the masters – the painters of the past five centuries who are today household names and whose masterpieces are almost literally priceless – and for the most part are no longer in any market. You cannot buy The Night Watch or The Mona Lisa for any money.

Though you can buy The Scream – somebody did earlier this year, for $120 million. But that’s not an investment – it’s showing off.

Invest in Art Before The Market

Of course, you can buy a work of art for a fraction – a tiny sliver even – of that sort of money. Whatever country you happen to be in, you will know – or you can learn – of good, perhaps gifted, artists who’re putting their heart and soul into unique works that would grace the Modern or the MoMA and which might, just might, be sought after in years to come beyond a very small universe of supporters. Perhaps it’s a family member, or a friend, or a friend of a friend, or just someone you’ve read about in Frieze magazine or the Guardian’s Art & Design section.

Ping-Pong Investment

But is investing in art an investment in the real sense of the word ? In all probability, it isn’t. And never, ever will be. There’s just too much of it – art, that is – being cranked out day in, day out all around the world for other than a tiny fraction to ascend from ‘unknown’ to ‘sought after’. If, in order to get a return on money outlaid, you had to pick one specific ping-pong ball out of a thousand – or 10 thousand – virtually identical ping-pong balls, what kind of investment would that make?

In the acerbic words of Felix Salmon, in his Reuters piece mentioned earlier –

I would never encourage speculating on the art market: it’s a rigged game, which you’re almost certain to lose. But if you really want to do it, here’s a tip: buy work which (a) is instantly recognizable as coming from the artist in question; (b) looks great when hung on the wall of an expensive apartment, and (c) comes from a fecund artist with a massive output. Oh, and if you can, get a painting with lots of red in it.

And commentators on art investments who seem to like art for the sake of it take a similar line. Here’s Forbes blogger and art/investment/collision (her words) writer Kathryn Tully, a couple of weeks back –

So own art, enjoy it and maybe, just maybe, it’ll make you money if you ever have to or want to sell it one day. But think long and hard before you buy art with that expectation (to invest in art), unless you are particularly wealthy, with plenty of cash to lose.

Art For Art’s Sake

If however you are not particularly wealthy, with plenty of cash to lose, spend a couple of hundred on that charming gouache of ‘Cat Under Streetlight at Midnight’ by your best friends’ art student daughter. You’ll have invested in her sense of pride and achievement and the painting will look lovely on your wall. For ordinary folk, in most instances, ‘Investing’ in art is an oxymoron.

By Invezz Newsdesk
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