ART INVESTMENT The Pulse of the Art Market “Art Investment: The Pulse of the Art Market.” Off the Easel Magazine. Summer 2012: 16 - 17. Updated from Summer 2012.
But is art a good investment? W
hen it comes to collecting fine art and investing, there are many myths. The truth is, fine art has proven to be a unique investment opportunity — one that is sure to appreciate while you get the pleasure of enjoying its beauty each and every day.
Yes, if it has been created by the “right” artist. Collecting fine art is becoming more common as a method of investing and saving. Most people don’t think of fine art when it comes to managing their money, but putting your money in art can offer greater returns than putting it in a regular savings account.
“Investors in stocks and shares want to buy at the lowest price and sell at the highest. With art,
it’s more important that they love a painting or sculpture and get an emotional dividend from it.” — Karl Schweizer, Head of Art Banking, UBS.
The art market is booming. In April of 2011, Paul
Cézanne’s The Card Players was purchased for an estimated $259 million by the State of Qatar, and holds the record for the most expensive painting ever sold. In May of 2012, Edvard Munch’s The Scream set the newest record for the most expensive work of art to be sold at auction for just over $119.9 million, which was quickly broken in 2013 by the sale of Francis Bacon’s Three Studies of Lucian Freud, purchased at auction for $142.4 million. These artists now join the ranks of Picasso, Monet, Van Gogh, and others whose works command the highest prices.
Consider the return on investment to the holders of the following works of art... Andy Warhol’s portrait of Liz Taylor, purchased for $3.6 million in 2001, sold at Christie’s in New York for $21 million in 2007. The annual compound rate of appreciation for the period was 34.2%. In May 2010, six bidders vied for Pablo Picasso’s Nude, Green Leaves, and Bust, which depicts the artist’s mistress, Marie-Thérèse Walter. When the canvas last changed hands in 1951, it sold for $19,800. This time it brought $106.5 million.
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Contrary to popular belief, art also maintains its value during times of stock market weakness and war. During the last Great Bear Market, 1966 to 1975, coinciding with the Vietnam War, the value of fine art appreciated 256%. According to a study by NYU professors Jianping Mei and Michael Moses in which they examined figures from the last 27 recessions dating back to 1875, fine art holds its value extremely well in bad times. Mei and Moses went on to create The Mei Moses Fine Art Index (www.
MeiMosesFineArtIndex.org), which tracks auction data on repeat sales of fine art by Sotheby’s and Christie’s. Based on the Mei Moses index, art investments have nearly kept pace with the stock market, although it is important to bear in mind that the index does not include transaction or storage costs, which can be quite high for art. So what makes art valuable? Demand drives price and today there is plenty of demand for art. Many of the big buyers are from the burgeoning economies of Asia, the Middle East, and Russia, but domestic demand is also high. Investors with cash are trying to find alternatives to a shaky stock market and precarious property market. At the same time, while art can make a good investment, experts warn collectors not to expect too much too soon. “Investors in stocks and shares want to buy at the lowest price and sell at the highest. With art, it’s more important that they love a painting or sculpture and get an emotional dividend from it,” explains Karl Schweizer, head of art banking at UBS.
“The Card Players”, Paul Cézanne
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