Practical advice from an art collector - on art as investment

Still life, R.B.Bhaskaran, courtesy Monsoon Canvas

As a long time collector, I have had the chance to mull over my art portfolio, which has been collected over the years. When I look at them, I see many from my earlier days that were purchased merely for capital appreciation and many that were purchased because they touched me in some way. In hindsight, I would say, the latter set of paintings still has the same effect on me unlike the ones I purchased purely for investment.

And what happened to capital appreciation, you ask? Well it has appreciated, but only notionally, I do not think I could monetize them for a decent profit…..

Art as a serious (organized) investment medium emerged only in the 2000s, promoted by Investment Banks looking for diversification of their portfolio. With a lot of new-money in the economy with the internet boom and the world becoming flatter, banks found an innovative and glamorous investment medium for their clientele.

But has it lived up to its expectations?

The performance of some of the recent funds like the ABN-Amro Fine Art fund and the Osian’s Fine Art fund (India) were not very encouraging. Unfortunately, they were unable to provide capital appreciation to the investors, on the contrary the investors actually lost a portion of their investment.

Investing in the works of modern and renaissance masters definitely pays off as those works are limited in numbers and there is no chance of further works being done. These works also command historic and academic value. One can also be sure of the real talent and value of the artwork due to the mass of literature detailing them. In other words an investor knows what he is getting. Unfortunately this is a luxury that is affordable by a few.

Whereas, in the case of contemporary art, which is more affordable, there is scope of increase in supply (as the artists are still active) and there is no antiquity value that it has. The artist and artwork has not been time tested (read, survived series of art critiques and analysis). One would need a lot of patience investing in one of them as it would be a long wait for a considerable appreciation, especially if the artist is very prolific. This effects the liquidity of contemporary art as a capital appreciation tool.

Either this or that, the best advice would be:

Buy an artwork that you love and that communicates to you in some way, as it is going to be hanging on your wall for a long time. Buy art for the love of it.

Cheers,

Art collector

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