The Wall Street Journal’s roundtable on investing in art explored a number of topics. Here’s the group’s take on which categories have the best investment potentail:
WSJ: Which art categories have the most and least investment potential?
MS. KUBERN: The old masters category has shown stable results over the past 10 years, and it will probably remain at that level due to the very mature nature of the market. Prices for the postwar and contemporary art category have also reached record-breaking highs, but here the phenomenon of an ever-growing collectors base and a slowing down in supply of museum-quality works by blue-chip artists is pushing up prices even further. The fact that art has finally been accepted as a meaningful way to protect investors’ cash during economic difficulty, paired with wealth from emerging markets such as China entering the category, has elevated demand. Short of options to divert their cash into, investors are holding tight to their art assets and hence create a shortage in supply.
MR. HOFFMAN: There are certainly different capital requirements for investing in the various art-market genres. The old masters tend to have higher purchasing prices and smaller margins as compared with contemporary works. However, potentially it is the contemporary pieces which can muster the most significant returns. For someone investing in art with us, we often advise that they spread their investment across the various fields, to mitigate loss. This, as implied, shows that the contemporary market is regarded as the most volatile with the old master works standing as the most reliable. This is by no means a rule, however, and so often the auction houses and dealers are surprised by unsuspected losses or gains.
MR. PLUMMER: Old masters is the least-volatile category (emerging contemporary is the most), but it has the least growth potential of all of the major sectors. Also, within the impressionist and modern sector, and this may sound counterintuitive, Picasso and possibly Warhol (in the contemporary sector) are now slower-growing.
The contemporary sector is where all the growth is truly happening now, but this is also a cause for concern. In the market crash of 2008, contemporary art prices fell by 50%.
It is not impossible that this could happen again since, despite what anyone says, the art market is cyclical.
How to Invest in Art (WSJ)