Research by Korteweg and Kräussl from Stanford University, (https://www.gsb.stanford.edu/insights/research-art-good-investment) using the BASI (Blouin Art Sales Index), showed investment in Art delivered an annual return, as an asset class, over 1972 to 2010 of 6.5%. According to Artprice.com, art auction turnover increased by above 5% in 2017 compared with 2016 and Deloitte’s Art & Finance Report 2017 notes that six of the seven major art indices reported positive returns in 2017.
So, is Contemporary Art a good investment?
Here are 10 reasons why I think so:
1. Carrying costs are Limited
When you buy a work of Art, you usually buy something that you can take home and put up on your wall. The piece is not normally destined for storage in a vault. Storage in your house usually comes with no additional costs to yourself, other than the minimal costs to put it up on the wall. There may be some minor costs in initial transport and subsequent transport, but these can be circumvented to some extent.
2. The Market is Growing
The average price for a work of Contemporary Art has risen from $26,160 to $27,600 in 2017 (+5.5%). The generalized price index, according to artnet.com increased 22% in 2017. The market has been growing for several years and there is no reason, given the uniqueness factor and appeal of the market that it will change anytime soon.
3. You earn Emotional dividends
Contemporary Art is one of the few alternative asset classes that you can appreciate on a daily basis. Your primary residence or secondary residence could be other examples. Having your investment on your wall at home provides daily emotional dividends as you contemplate it. A report in the United Kingdom, “Creative Health: The Arts for Health and Wellbeing” found evidence that art brings a wide range of health benefits, speeding medical recoveries and improving overall quality of life. You can’t beat that!
4. Each work is (usually) unique
Apart from limited edition prints or photographs, Contemporary Art works are unique. You’ll be the only owner and nobody else will have your investment. The uniqueness can also be a problem. Pieces of art are not “fungible”. Unlike shares and bonds, each work of art cannot be replaced by another work, as it is, by definition, unique. This, however, can be a source of great value.
5. Look at Piet Mondrian
Mondrian’s 1929 piece, Composition No III, made up of black lines surrounding white, red, blue and yellow cubes, recently sold for $50 million. While you may not be lucky enough to buy the next Piet Mondrian or live to see it go up to $50 million, you can definitely have a go at it. Vast resources on Contemporary Art exist, from reviews to dedicated books and websites. Treasure troves of information are out there and easily accessible. Like buying a stock, however, you need to do your research and you need to invest long-term. The payoff from careful investment choices can be staggering.
6. Brokers will spend a lot of time with you explaining the market
Art brokers don’t sell in volumes, like people selling pens, so they tend to spend a lot of time with potential clients. If you go in prepared with your questions, you can gather priceless information from brokers. Just walk into as many galleries as you need to before you get yourself comfortable about your investment decision. I’ve found you can get more time with Art brokers than any other asset class broker.
7. Your capital can be guaranteed
This may be a particularity of the asset class, and it isn’t always the case, but some brokers offer capital guarantees. I once enquired about a Salgado and was offered the capital guarantee option. I’ve recently had further discussions with other galleries who have proposed it when I asked. This is rare in the investment markets, so definitely a plus if you can get it.
8. Investing in Art, makes you sound cool
This is for those of you that like the brag factor. The instagrammers and facebookers out there who understand what I’m talking about. Or if you like your cars, then you’ll get it too. Everybody appreciates some form of admiration. Being an investor in Contemporary Art has a certain ring to it. Put that on your Linkedin Profile!
9. It is another form of diversification
Good portfolio management requires diversification. For more information, check out Portfolio diversification. Contemporary Art is another asset class that doesn’t neatly follow macroeconomic booms and busts to the same extent as stocks and bonds. Wine is another good example.
10. Once you buy Contemporary Art, you get invited to exhibitions and get to meet artists, gaining greater insight and investment prowess
Once you enter the world of Art Investor, and given that the market is small, you tend to get invited out to new shows, exhibitions and meet the artist events. These are unique opportunities to get greater insight into the asset class. Investing in Amazon won’t get you the opportunity to meet Jeff Bezos, but buy a Tim Walker and you have a pretty good chance of meeting the photographer in person at his next exhibition.
Getting close and personal with artists, other investors and brokers, helps you better understand the market, what makes a great work and helps improve your ability to invest.
Art can be a great source of wealth, but like all asset classes, you need to do your research before you can cash in all those emotional dividends and build your own net worth at the same time.
Want to go further?
Check out these Online resources:
Artnet, Find artworks for sale, online auctions, top galleries, leading artists, and breaking art market news from around the globe.
Artsy, The world’s best galleries, auctions, fairs, and museums – all in one place.
Artprice, the world leader in Art price and market information
Galleries I’ve worked with:
Paris: La Galerie Particulière
London: Michael Hoppen Gallery
Los Angeles: Peter Fetterman Gallery