Art and commerce have never been particularly happy bedfellows, which is why art has traditionally been viewed as a high-risk market. However, investors can make smart and informed purchases, that will appreciate in value, whilst providing aesthetically pleasing talking points to hang on the walls of their homes or offices – providing they have the right information.
We asked Alistair Bailey, Victor member and managing director of Art Equity, London, to shed some light on how to be smart when investing in art.
RISKY BUSINESS
Like any asset class, the art world is not without risk. When you consider that the market is unregulated, it’s terribly inefficient compared to traditional investment classes. It can also be very opaque. So traditionally, a financial adviser would view that as incredibly high risk. However, you can use those deficiencies to your advantage as an investor, providing you’re very well informed.”
KNOWLEDGE IS POWER
The number one thing, as an investor coming into the art market, is that your research and due diligence has to be extremely thorough. You really should take advice from experts in the market and use that market intelligence to make a sound investment decision, as you would in any other market. You also have to recognise what you’re investing into. Ultimately, artists don’t create investments they create artworks, so you need to engage with what it is in its purest form. You’re potentially buying something that has a cultural significance and heritage, and was never conceived to be a commodity.
EDUCATION, EDUCATION, EDUCATION
You have to dig a lot deeper than you would in a more regulated market environment, but that means you’re then educating yourself – and you’ll get more absorbed in the social context of why the work was conceived. That’s why we’re very strong on education side and then using that knowledge to help make investment decisions. The amount of information available now to an investor – in terms of auction results, secondary market trading and indexes like the Mei Moses – provides a level of transparency on how the market’s tracking and offers a barometer, but ultimately you’re still dealing in something that is governed by a level of subjectivity.
THINK LIKE A COLLECTOR
The best investors in the art market buy with the eye of a collector. The vast majority of my clients are art lovers and collectors, but they also invest in the art market. The fundamentals of investing apply, but if you lose sight of the fact that it’s fine art, then you’re going to make mistakes. As a collector, the primary motivation to acquire is because they love the work and it fits into their broader collecting mandate. That said, I’ve never met a collector who hasn’t negotiated on a price.
APPROACH LOVE WITH CAUTION
I fully encourage people to buy things they love – if they can afford it and the motivation is to live with the work and enjoy it for a long period of time. I think there’s absolutely nothing wrong in doing that, in fact it should be encouraged. It’s a wonderful thing. But, If you’re using your investment dollar to buy something that you happen love, then you need to ensure that you don’t get carried away with the love aspect and overpay. As with the best investments, you make your money in buying. If you buy well, then the ability to sell well exists.
BEWARE OF HOT MONEY
We’re always cautious of someone that comes to the market driven purely by an investment mandate, primarily because they’re new to the art world and they underestimate the risks, particularly in terms of liquidity. Pure investors – on the very plain vanilla, buy, hold and sell strategy – have the hallmarks of what financial markets refer to as hot money, and any asset class that has hot money hitting it will create a mini cycle of booms and busts as a consequence. It’s good for now but in six months time, or two years time, when a new bright shiny thing is on the horizon, they want to pull their money out of that to go and play somewhere else. Also, if your investment horizon is essentially to buy and flip, which is very difficult to do in the art market, then it’s a different process than buying and holding for five, 10, 15 or 20 years.
For further information or to contact Alistair, please visit artequity.com.au.
ART FAIRS AUTUMN 2014
…and if the above has whet your appetite to enter the art world, please find below is a round up of this autumn’s biggest international art fairs.
Also, if you’re thinking of flying private to any of the events, please don’t hesitate to get in touch for a flight quote – especially if you’re in the market for buying… the last thing you want to do is check your latest priceless purchase into a budget airline’s baggage hold.
London – Frieze
15th – 18th October
Regents Park, London
Since launching in 2003, the Frieze Art Fair has become one of the highlights of the London art scene calendar. Taking place in a bespoke built structure in London’s Regents Park, Frieze exhibits over 1,000 contemporary artists, displayed by 170 galleries. In addition, Frieze stages a wide variety of talks, debates and keynote lectures.
friezelondon.com
London – Frieze Masters
15th – 19th October
Regents Park, London
Running simultaneously with London Frieze, Frieze Masters displays works of art created before the year 2000, spanning back some 6,000 years. What’s more, Frieze Masters will be staging a series of talks at which major artists, critics and curators will discuss the on going relationship between contemporary and historical art.
friezemasters.com
London – PAD
15th – 19th October
Berkeley Square, London
London’s leading fair for 20th Century art, design and decorative arts affords the opportunity to discover and acquire pieces of museum quality with a distinct history. PAD’s boutique setting is designed to inspire collectors, art consultants, museum experts, interiors specialists, design practitioners and the public alike.
pad-fairs.com
Paris – Foire Internationale d’Art Contemporain (FIAC!)
23rd – 26th October
Grand Palais, Paris + other venues
Taking place across seven prestigious venues in Paris, with riverboats ferrying festival-goers between the numerous exhibition spaces, FIAC! remains one of the world’s biggest contemporary art fairs. Now in its 40th year, FIAC! will be displaying works from the world’s leading galleries, as well as staging numerous performances, talks, tours and films.
fiac.com
Miami – Art Basel
4th – 7th December
Various venues, Miami
Regarded as the winter meeting place of the international art world, Art Basel, Miami invites an abundance of private collectors and over 250 galleries to exhibit a huge variety of contemporary and modern works across nine show sectors. Owing to the clement conditions of Florida, several of the displays and installations are staged in public places around the city.
artbasel.com
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