A fine Eastern Pende Panya-Gombe African mask. Coll.: David Norden
But is it art?
Rebekah Kendal Fri, 31 Aug 2007 found at http://business.iafrica.com/features/503860.htm
Pickled shark: £8-million. Platinum cast, diamond encrusted skull: £50-million. With figures like these, the age-old question ‘but is it art?’ seems somewhat irrelevant.
British artist du jour Damien Hirst seems to understand that the art investment market is actually all about the figures. His most recent contribution to the art world, ‘For The Love of God’ – an 18th century skull cast in platinum and covered in 8601 diamonds weighing a total of 1106.18 carats – cost £12-million to make, but is expected to fetch £50-million.
Prior to ‘The Love of God’, Hirst’s most expensive work, a shark suspended in a formaldehyde tank, was purchased by Steven Cohen for £8-million. By creating a work which cost £12-million to manufacture, Hirst has made his work six times more valuable than it was before – a leap which puts him on par with Pablo Picasso.
A bit of a gamble perhaps, but the art market is not quite as unstable and irrational as it might seem. Sure, tastes change and the criteria are largely subjective, but if you have enough money and know-how to invest in the right artists and works, you will more than likely reap the benefits.
But is it worth it?
So, how does the art market compare with other asset classes? According to finance professors Jiangping Mei and Michael Moses from the Stern School of Business at New York University, it is pretty competitive.
The professors compiled an index, the Mei/Moses Fine Art Index, which is comprised of 8000 pieces of art auctioned by Sotheby’s and Christie’s since 1950. Through extensive research, they compiled complete sale histories on each piece. The Mei/Moses Index, which uses regression analysis of repeat sales, is the most precise measurement of values in the art market.
Mei and Moses discovered that from 1950 through 2004 the index generated an average annualised total return of 10.47 percent. They also found that the market has a low correlation with the stock market, which means that art investment can add important diversification to your investment portfolio. Furthermore, art has proved to be a rather secure investment, outperforming stocks in major wars.
On the other hand, investing in art does present some risks and problems. It is more difficult to predict trends in a market which is based on changing tastes and the unquantifiable ‘aesthetic value’. Obviously it is safer (and considerably more expensive) to invest in a Picasso or a Klimt than an up-and-coming artist. But, should you take a risk on the latter and they become popular, your return will be much greater. Similarly though, they could fade into oblivion, leaving you with a substantial loss.
It is also important to remember that art investment doesn’t provide a steady and constant income; it needs to be insured; and it is not an easily transactable commodity.
Proudly South African Art
Admittedly, only the disgustingly wealthy can really invest in one of the big names, but this doesn’t mean that you shouldn’t consider art as an investment opportunity. If you have anything upwards of R10 000 to spend, you can invest in some valuable South African art.
At the end of May 2007, Bonhams, one of the world’s oldest and largest fine art auction houses, became the first international auction house to hold a sale dedicated entirely to South African art outside South Africa.
The auction was a resounding success, raking in a total of £1 422 528. The top two sales went to paintings by Irma Stern, followed by works by Gerard Sekoto, Jacob Hendrik Pierneef and Pieter Willem Frederick Wenning.
Bonhams’ director of South African art, Giles Peppiatt, was quoted by AFP as saying: “The demand for the great South African artists is no longer confined to South Africa – it is now truly an international market.”
It is also no longer confined to the South African ‘greats’. At the Christie’s London auction in June, Dylan Lewis sold 75 bronze sculptures totalling £1.9-million. For a William Kentridge, you can pay anything between R10 000 for a graphic print, R400 000 for a drawing and R1.2-million for a sculpture. Your investment would be well worth it however, as his works have been doubling in value every two to three years.
Other South African artists to keep an eye on are Jane Alexander, Penny Siopis, Marlene Dumas (currently based in the Netherlands), Zwelethu Mthethwa, Wim Botha, Pieter Hugo and Mikhael Subotzky.
The first step in investing in art is to become informed. Read art magazines and publications; visit and become a member of museums and galleries; and for South Africa specific art information check out websites such as www.artthrob.co.za and www.art.co.za .
Sue Lipschitz from www.southafricanart.co.za says: “Museums are always a good guideline, overseas museums and galleries having highlighted some of the emerging and established South African artists recently. The Constitutional Court has amassed a good collection, as have some of the large South African corporates.
“A good idea is to go to the end-of-year exhibitions at the art schools and see who is doing what. Contemporary art is not about pretty pictures anymore. It’s really all about issues.”
In determining an artist’s worth, find out where the artist’s work has appeared, whether there has been an increase in prestige over time, how the artist has fared in reviews and what his or her sales track-record is.
Fake or damaged?
You don’t have to start with oil paintings. It is better to buy a graphic print from a well known artist than an oil painting from a lesser artist. Never simply buy a work because the dealer says you should – ask questions and decide whether or not you actually like it because it might be hanging on your wall for some time.
If you decide to invest in just one or two artists, you can build up a valuable collection over a period of time. If you do so however, it is a good idea to invest in pieces from different periods or in different mediums.
Look out for fakes or damaged work – it helps to buy works from a reputable source. Always make sure that the work is signed and that edition works are numbered. It is also important that the work is valued correctly and that the provenance of the work is known. Make sure that you don’t devalue the work by having it badly framed. Once again, reputation is everything.
And how much is it going to cost you to get started? Sue Lipschitz gives a handy breakdown: “In general, if you are spending under R10 000, buy what you love; under R5000, treat yourself to an indulgence; and under R2500, buy something on impulse!”
If you happen to have R700-million — the equivalent of £50-million — floating around, I would suggest you invest in good old diamonds. Lots of them.
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