Consider longevity when investing in art
With art prices soaring, this creative commodity is seeing interest from investors skyrocket, but art experts are warning that it is essential to keep an eye on the longevity of the investment.
Art investment has been attracting increasing global attention in recent months following the sale of an oil painting which attracted the second highest price ever paid for an artwork at auction. The Amedeo Modigliani oil sold for $170.4 million to billionaire collector Liu Yiqian.
However, before art buyers get carried away with the prospect of huge gains on works, industry experts are advising that art investment should be viewed in the long term, rather than as a means to short term gain.
President of the California-based Gerber Kawasaki Wealth & Investment Management, Ross Gerber told OnWallStreet.com: “Art is very popular now as an investment for many reasons…the key is not to sell it. You should buy these things with no intention to sell. It is to be enjoyed and passed on.”
Gerber, who works to ensure investments made by his clients will help them to meet long term planning goals, emphasizes the fact that a few principles must be followed when injecting money into the art world. Dan Desmond of the Blue Rider Group – which is part of Morgan Stanley Wealth Management – agrees, saying: “The art market has grown dramatically in the past decade. It’s great for artists and museums. But tastes change and the market changes.”
In terms of investment, the $50 billion global art world market has changed in recent years, with analytical tools now available to ensure that buyers, and their advisors, can purchase in light of additional information. Searchable databases show the prices artworks were sold for at public auction, however these do lack the lists of art that has been sold by private dealers – something which is estimated to total around $25 billion.
The way in which art is sold has also changed somewhat, with auctions by major houses such as Christie’s now organised around a certain theme, such as ‘The Artist’s Muse’, rather than one particular artist or era. This means that a variety of artworks can be offered at one auction, ranging from modern paintings to sculptures and ancient oils, therefore attracting buyers to try something that they may have not previously considered.
According to Leslie Rankow, a New York-based art advisor, this strategy helps to boost prices across all art pieces. In essence, customers are enticed in by the well-known paintings and then attracted to the newer pieces in light of their link to the genre and likelihood to rise in value as the key pieces have done.
However, despite current high valuations on pieces, Rankow told the publication that while there is “so much money around” at the moment, if the economy shifts, “contemporary works are going to sink back into a more realistic price range.”
The perception of the world of art investment has also undergone a change over the last few years, with people no longer viewing it as an asset class solely dominated by the super wealthy.
Art advisory teams have sprung up across the globe, assisting people from all wealth brackets to buy into the art world. The newly created advisory team at Emigrant Bank highlights this shift in perception as it is not a bank that deals solely with high-net worth individuals, but rather to all levels of wealth. This proves the “long-reach tentacles” of the art investment arena, Rankow told the publication.
Many industry experts agree that the principles for investing in the art world are perhaps different to any other asset class: potential buyers are advised to purchase artwork as collectors, not speculators, and to buy in a conservative manner.