Monday, January 11, 2010
Fine Art and High Finance: Expert Advice on the Economics of Ownership
Edited by Clare McAndrew
Bloomberg Press, $39.95, 336 pages
The art boom of 2004-07 saw such staggering growth, particularly in contemporary art, that it is hardly surprising that art is increasingly being commoditised, bundled into funds and flagged up as an alternative asset class.
But while most people can recognise a Warhol or a Picasso at 10 paces, they have far less knowledge of the complex issues inherent in trading something that is almost always heterogeneous, in an opaque and unregulated market.
The editor of this book, Clare McAndrew, has a PhD in economics from Trinity College Dublin and runs a consultancy focused on the art economy. Her book The Art Economy, published in 2007, was an investor’s guide to the art market. This book updates and expands the topics covered in that volume, using a team of expert contributors, from art law specialists Pierre Valentin and the Danziger brothers to insurer Jill Arnold.
After a brief gallop through the history of the modern art market, McAndrew outlines its current structure and main players before getting to grips with its economics. She makes the fundamental point that “one of the most important economic features of the market is that it is essentially supply-driven ... increased demand ... cannot necessarily increase supply ... and instead elevates prices”.
But the art market is also difficult to quantify, and even its size, as several contributors point out, is only an estimate: $65bn in 2008, according to McAndrew. Moreover, how do you assess the price of a painting when four Picasso portraits of Dora Maar, all from the 1940s and of comparable size, can sell for between $4.5m and $85m within a three-year period?
There have been many attempts to establish indices for art, none of them completely successful. As Dr Roman Kräussl of Amsterdam’s VU University points out: “All price indices for the art market suffer bias because of inherent problems in the available data.” The only available prices are those made at auction, which eliminates about 50 per cent of transactions, those made through dealers. Having summarised publications from 1974 to 2008, Kräussl concludes that “studies on the returns on art investment have produced very mixed results”.
In the light of this, it might seem surprising that so many art funds have been started. The enormous profits that could be made until last year were an obvious inducement – particularly in India, which, according to wealth management specialist Randall Willett, represented the majority of the 50-odd funds that were “active” in 2009. Willett outlines the various fund models, while McAndrew contributes a case study of the only art hedge fund, based in the UK. Chapters on insurance, government regulation, art banking, risk, taxation, conservation and the illegal art trade complete the book.
There are some inconsistencies in coverage: for example, taxation in the UK and the US are detailed but the chapter on the illegal art trade covers only the US, leaving out the world’s second-largest centre for art trading. Art-related litigation is growing, and UK and US legislation differ in a number of aspects affecting the art market.
What the book cannot do (and nor does it try to) is predict how the art market will evolve, as it is still in the throes of readjustment in the wake of the recent financial crisis. That crisis had a major impact, particularly in the area that had seen the biggest gains: contemporary art, where some artists have seen their value fall by as much as 50 per cent.
The decision to “invest” in art is complex but this book provides a wealth of information for those who are thinking of putting their money – as headline writers love to say – into Monet.
Review by Georgina Adam
Published: January 11 2010 03:47 , FT.com
Thursday, November 5, 2009
There are primarily 2 ways in which one could invest in Art:
1. Investing in individual pieces of art work similar to buying shares of a particular company or
2. Investing in an Art Fund which is similar to investing in a mutual fund, where there is no possession of the art work
This article discusses what we need to look for while investing in Individual artists and artworks.
Like the stock market, there are some key attributes that you should be aware of before buying an artwork. The artist is the brand (like a company) and the products are the artworks he produces, therefore it is pertinent that one invests in a good artist. How to judge whether an artist is good? Here is a check list of factors that you can use:
1. How famous is the artist? – A little bit of research will let you know who the well bought artists are, who the emerging artists are and the ones that are promising starters. You need to make the decision between these different categories of artists. For the very famous ones, your budget needs to be higher than for a promising star, which may have high appreciation potential.
2. What is the artist’s training background, is he/she from a famous art school? – did he/she train under a famous artist? – Most galleries have a bias against self-taught artists (the artists who do not have a formal education), but this doesn’t mean there are no talented self taught artists – MF Hussain, Bhupen Khakhar are the most prominent ones.
3. How many shows or exhibitions has the artist done in the past and in which galleries? – The more the better, since galleries only host artists that they think will sell well.
4. How long has the artist been painting? - The longer the better, as style and technique matures over the years, with experience.
5. The number of awards and accolades won by the artist – Awards and accolades given by recognized national and international art institutions.
6. The workshops and other learning events attended – Workshops help an artist learn and grow in creativity, technique and outlook.
7. The number of international shows exhibitions – International shows and exhibitions proves that the artist is not only a good artist but also a good PR person, which is important to sell art.
8. Find out whether reputed art institutions like museums, organizations have the artist’s work in their collection.
9. Does the artist have a unique style – This can be found from reviews written on the artist or by comparing his works to others
10. But the most important question is DO YOU LIKE THE ARTWORK, because it will be hanging on your wall for sometime.
The above checklist should help you select a good artist for the purpose of investment.
• It is best to acquaint yourself with the art scene before making a decision to purchase a piece. It is advisable to visit art shows, galleries and use the internet to read reviews and article on art.
•All galleries have artist biographies on their websites, which provide most of the information needed as above. Some sample biographies :
o CF John / Asma Menon / Yashwant Shirwadkar
• In the event of purchasing, please make sure to get an authenticity certificate – preferably from the artist himself.
Happy Art Investing !
Above : An untitled portrait by TM Azis