Art Market Blog – The NuWire Investor Interview
I have been receiving requests for interviews on a regular basis some of which I agree to take part in and some of which I don’t. One of the interviews that I did agree to was with NuWire Investor who run a website that publishes news covering a wide-range of US and international investments including real estate, lending and small business. The questions that NuWire investor asked were particularly good so I that I would share my answers with you.
Q. What do you think makes art a worthwhile investment, when compared to stocks, bonds, commodities, etc.?
A. First of all the art market is a relatively insulated market which means that outside influences such as the economy, the share market, interest rates etc. tend to have very little, if any, impact on the value of artworks. This results in the art market being relatively stable compared to other investment markets which means that investing in fine art is a great way of off-setting riskier investments and adding diversity and balance to an investment portfolio.
Secondly art is an asset backed investment which means that you are investing in something tangible as opposed to the stock market where you could potentially end up with nothing. An artwork will always have a value and if chosen correctly, should not go down in value over the long term, with a worst case scenario of the artwork holding its value for a period of time.
Thirdly the art market allows you to invest in something that is not only a good investment but also provides long lasting enjoyment, a factor that should be seriously considered when looking at investments.
Q. How should someone new to art investment go about getting started? What sorts of opportunities are preferable for an investor new to the art market?
A. I would suggest that anyone new to art investment begin by getting to know the market by attending galleries, auctions and art fairs where one can observe and interact with other people who are purchasing art and begin to an appreciation for and understanding of the different factors and that determine the investment potential of an artwork. Where ever you go you will find that a city’s art scene is made of a very close knit group of people that share a great amount of knowledge and experience so it is always a good idea for new investors to become involved in the art scene of the city that they live in and take advantage of the existing network of knowledgeable and experienced people. I would also suggest that people take some of the short courses in art appreciation and the art market that are offered by the major auction houses such as Sotheby’s and Christie’s which can provide invaluable contacts and an insiders view of the art market.
Q. What are some of the methods you have used to find good investment art? What method(s) have been the most successful for you?
A. One of the most important factors to look for in an artist is commitment to furthering their career as you are investing as much in an artists career and their future as an artist as you are in their artwork so if you are investing in an artist you want to be as sure as you can that they will continue to further their career. I always take the time to research an artist’s career for signs of commitment such as a tertiary degree in art, involvement with a group of artists, involvement in exhibitions and entry in competitions.
Q. What types or styles are doing particularly well (or badly) on the market right now?
A. There seems to be a particular interest in street art at the moment by artist’s such as Banksy, Faile, Paul Insect etc. as well as a increase in demand for top quality photographic works. The opposite is the case for old master works which are being overshadowed by the diversity, quality and marketability of the contemporary works on the market.
Q. Do you know of any specific examples of art sales that panned out well (or badly) for the investors involved?
There are always reports in the media of good and bad sale results in the art market which can be found by doing a search for art market in a news search engine. Take for example the Warhol silk-screen print “Simply Liz” which was bought by Hugh Grant in 2001 for US$3.6 million dollars and sold last month for US$21 million dollars which is a pretty impressive return on the original investment in anyone’s books.
Q. Do you prefer going after work from unknown artists, emerging artists or established artists? What are the benefits of one vs. the others?
A. In the current climate I am leaning more towards emerging artists because the value of the more established “blue chip” artists is being artificially increased by factors that create a false impression of value such as auction price guarantees, media hype and an association with social hierarchy and cultural elitism. The prices for the artworks at the top end of the market have been most affected and have in effect experienced a sort of artificial acceleration to a point several years ahead of where they should be. These factors have increased the price of the work of many well known artists but have not really contributed anything to the value of the artist’s work which means that the increase in price is most likely short term and will experience a minor correction at some stage in the near future. I will still be investing in works by established artists but I will be doing so cautiously and only after extensive research and analysis.
Q. How much should an investor’s personal artistic knowledge and tastes come into play when making investment decisions? Is it helpful to rely on one’s own knowledge and background, or would it be best to consult a professional?
A. Whether or not an investor takes their own personal taste and artistic knowledge into consideration when investing in an artwork depends on the goals and plans that they have for their investment such as whether or not they will be purchasing purely for investment or partly for enjoyment. I would suggest that anyone considering investing in art should take the time to calculate and record the financial goals that they have for their investment in art along with what they expect to achieve using average profit percentages for art and past performance then make a detailed plan for how you can achieve these goals. I would certainly recommend that any art investor consult a professional because they will be able to give you the information that you need to be able to calculate the goals that you want to achieve and help you make a plan to achieve those goals.
Q. What are the benefits of investing through an art fund, rather than on one’s own? Disadvantages?
A. The advantages of investing through an art fund are that you will usually have the option of investing in shares of several artworks which means that don’t have to invest all your money in one particular work. Another advantage is that the works you are investing will have been carefully chosen for their investment potential by experts in the field thus increasing the potential for profit.
The disadvantages are that you have a limited choice of works to invest in and you don’t get to take possession of the artworks and enjoy owning them. The investors also have a limited amount of control over when and how the works that they have invested in are sold which may be considered by some to be another disadvantage.
Q. Can art purchased for investment purposes be “enjoyed” (i.e. hung on the wall), or does it need to be carefully stored in order to remain a viable asset?
A. One of the benefits of investing in fine art is the enjoyment associated with owning fine art so an investment artwork can be enjoyed as long as standard conservation practices are employed such as keeping artworks out of direct sunlight and areas with high humidity, displaying in an area with adequate ventilation and displaying away from areas that experience fluctuations in temperature from air conditioners, heaters etc.
Q. What else do you think is important for people interested in getting into art investment to know?
A. I think that it is extremely important for people to know what to expect from an investment in art. An investment in art should always be viewed as a long term investment that will need to be held for at least 5 years (generally 5-10 years) to achieve a reasonable return on their investment. There is also a tendency for people to not take into account the costs associated with selling an artwork when they are making a purchase and planning their investment strategy.
**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.