Justin Urquhart Stewart, Co-founder of Seven Investment Management explains more. Despite spending more years in the industry than I care to admit, I do realise that financial investments are peculiar animals. Is there an art to investing in art?
You are buying something that despite the amount of money often involved is inherently intangible. They are also difficult to completely comprehend and you only tend to find out that you made the right decision many years after the event. Meanwhile, any investment benefits tend to accumulate gradually rather than provide any instant gratification!
These points, however, also serve to underline what a different proposition investing in art is.
Even if you’re buying art as an investment, rather than to ‘fill’ a space, there is usually some immediate fulfilment. You should very quickly be able to step back and admire an acquisition. This for me is what’s key to buying art – that sense of satisfaction.
The most extravagant art that I’ve ever bought was a pair of small Venetian-style bronze sculptures by Philip Jackson. They cost about £30,000 and I saw them as an indulgence and an investment. But, I still bought them because I love their beauty rather than what I think they might be worth in the future.
So, if you are interested in investing in art, where do I think you should start?
First, investors should start off with a plan to invest. That applies whether you’re focusing on art, financials or anything else, but you should also think through what you expect in terms of any eventual returns. All investments have the capability of falling in value, as well as increasing, to the point where you could get back less than you initially stumped up.
Investments, after all, can fall out of favour for a variety of reasons. Art is a particular purchase, however, because you’re buying something that has a value that is more than its cost of production. Creations by living artists sometimes easily exceed the cost of art achieved by someone a century ago, and that’s despite the fact that someone alive can replicate their work, diluting the value of the original.
Art is also affected by fashion trends, provenance and by the views of a handful of individuals – dealers and gallery owners remain key despite the pervasiveness of the internet. And, while there are numerous celebrity artists, it’s still the collector who sets the price at the end of the day. So you may have to hold on to your investment longer than you anticipated to reap a reward.
While I’m not going to give any investment advice, I see seven practical points you might want to consider:
- Keep an open mind and allow yourself to be surprised – art can inspire and (should) encourage emotions
- Take the time to look – art requires a commitment as it will probably be in your home or office for many a year to come. Also try to understand what is a realistic value to pay, so you are not just paying for a fashion fad
- Be careful what you buy – do your homework into who has owned it, why it’s being sold and what’s the provenance. As with most things, if it seems too good to be true, it probably is – art, after all, is an unregulated industry
- Talk to other collectors of the same artist – find out as much history as you can about the market for your art and assess if there’s some sustainable demand
- Stick to your budget – given that art can be difficult to sell on, if you have paid too much for a piece, you may come to resent it
- Toss out any preconceptions – just because your best friend has a hideous piece of contemporary art, you can’t tar the whole genre with the same brush!
- Think whether you can keep it safe – if you like it, so may others! And any insurance might not be enough…
At the end of the day, any art investments are and should be personal. But, it is always worth remembering that past performance is never an indication of what might happen in the future – you bought it because it’s great, not for greed. Now, we all have our different, even secret, hang ups – but mine are mostly on the wall – and there for all to see and hopefully admire.
Seven Investment Management LLP is authorised and regulated by the Financial Conduct Authority. Member of the London Stock Exchange. Registered office: 55 Bishopsgate, London EC2N 3AS. Registered in England and Wales No. OC378740. Visit their website here to find out more