Buying well is key to successful art investment and is a delicate balance between aesthetic appreciation and financial savvy. Viola Raikhel-Bolot explains more.
Investing in the art market can provide impressive returns, yet an even greater reward can be derived from an individual’s passion to acquire objects of great beauty. The benefits of investing in art include a low correlation with other asset classes.
Economists have predicted that over the coming years a concern about future inflation or the return to financial instability may drive individuals towards increasing their portfolio allocation to art as an inflation hedge. In addition, the competition for artworks adds to the inherent scarcity to make art a desirable asset for investment purposes.
Whilst anomalies can exist in the art market (as they can in any market), record prices, strong returns and increased institutional buying have sparked significant interest in art as an asset class. If one goes about investing in art with the right balance of aesthetic appreciation and financial awareness then you can ensure that what you have bought will appreciate over time. So, how does one know what the perfect balance is?
To ensure you buy wisely, protect your asset and enhance its value we have compiled a short list of some tips for buying well:
1 – Identify the Seller
It is important when considering an art purchase to identify who you are buying from. Auction houses, art dealers and art advisers are all incentivised differently. Understanding the seller’s motivation will assist you in making informed purchases. The objectives of dealers and auction houses is to sell consigned and existing stock, therefore advice from these parties can in fact be skewed with a focus on business profits and reaping in-house commissions.
In contrast, the sole purpose of an independent art adviser is to identify the best source of works which suit their client’s collecting objectives without any bias. While auction houses charge both the buyer and seller a percentage on the same transaction and dealers sell at retail prices, an independent art adviser is able to leverage discounts for you in the market place and provide a completely transparent transaction.
2 – Do Your Research
Discovering an artwork that appeals to you aesthetically is only one of the first steps in the collecting process. Ask yourself – does this piece represent the best possible work by this artist, within my budget? Researching the artist’s body of work will ascertain whether or not your selected Picasso, for example, is the best possible representation of his Blue Period.
3 – Provenance
Another factor to consider is an artwork’s provenance. This can make a considerable difference to the selling price. In the current market, works from private collections with an excellent public exhibition history are in high demand and occupy some of the top lots by value at auction. While the prestige of being featured in an exhibition at a world-class institution adds to an artwork’s desirability and value, this is not to say that artworks kept out of the public eye are worth any less. A Monet painting, “Nympheas” (Water Lilies),1907, owned for many years by the reclusive heiress Huguette Clark and not publicly exhibited since 1926, sold at Christie’s in May 2014 for $27 million.
4 – Condition
Condition is another very important element which can greatly impact the value of an artwork. It is essential to request independent condition reports before making a purchase. Similarly when identifying works privately or at auction, an independent examination of the artwork’s by your adviser with a UV light will immediately ascertain whether or not the existing condition report reflects the actual state of the work.
5 – Protection
To protect your investment and ensure it appreciates in value it is important that your artwork is properly insured. If you have owned an artwork for several years, the initial valuation could now be out of date and not relevant for insurance purposes. Therefore it is recommended that an annual valuation is obtained to reflects changes in the marketplace. Where possible it is also recommended to identify if your artwork can be featured in public exhibitions as this will enhance the works future sale value and desirability.
Buyers and sellers should always seek an independent and impartial adviser to undertake thorough due diligence at all stages of the collecting process. With an unregulated market, inflated prices and counterfeit works, a good adviser will ensure clients avoid the many pitfalls and potentially unpleasant surprises that can occur in the market place.
This article was prepared by Viola Raikhel-Bolot, Director of International Advisory at 1858 Ltd Art Advisory, who is frequently called upon to assist clients when buying and investing in art. For more information please visit www.1858ltd.com