Fine Art purchased Frank Auerbach’s Mornington Crescent in 2005 after Hoffman’s experts studied the figurative painter for a decade. Auerbach, who ran in the same “London School” circuit as Francis Bacon and Lucien Freud, kept a low profile. The reclusive artist’s works, which were then selling at $500,000-$800,000, about a tenth the price of Bacon’s. So when the right Auerbach came along, the firm bought it for $1.1 million and a year later, sold it for $2.3 million.
Georgina Adam reports that SplitArt has filed for bankruptcy taking €5m of capital with it and marking another attempt at financializing art that has not worked out. Though similar-sounding schemes for trading art shares have been established in Asia and France, none have yet to prove successful:
This ambitious but controversial attempt to create the world’s first “stock exchange for art” ended in liquidation in the Luxembourg courts at the end of last year. The project, which at one point employed 18 people, aimed to turn art into a fungible asset by splitting it into “certificates”, which could then be traded on an exchange. Most of the funding came from an Israeli source, and Deloitte Luxembourg, which has an active art and finance service, helped to promote it but without investing in it. The idea was that the owner of a work of art would put it into SplitArt, which would convert it into “certificates” tradable on an online multinational trading facility. But the project ran aground after a split (!) between investors about its direction. One minority investor said: “The majority wanted to build an IT platform and stock exchange to make money, but the minority saw the project as a way of creating a new transparent, liquid, efficient market.”
The Art Market: Bid to Save the Planet (Financial Times)
Georgina Adam provides a rare and valuable glimpse into an art fund with some results from Gil Brandes of Artpartners who has made 30% on the sale of 5 works from his Artpartners fund which invested $9m with a 5yr horizon. (Adam doesn’t make it clear whether the 30% return is based upon the $9m total or the purchase price of the five works sold.)
“We did well on two [Haruki] Murakamis, [Rudolf] Stingel, [John] Chamberlain and in a small way on Cindy Sherman,” says Brandes: “And we are hoping to do well on a [Donald] Judd. But we have taken hits on a Jonathan Meese sculpture, a Jack Pierson, a Franz West and Anselm Reyle.” The worst case, not surprisingly, was a large Damien Hirst butterfly piece that the fund bought for $1.5m, now being resold for just $1m.
Artpartners is raising a second fund that will invest $25m over 10 years according to Adam.
The Art Market: Top of the Charts (Financial Times)
“Investible Art Market” Is 3k Pictures Sold Yearly; We Buy 100
Philip Hoffman claims Qatar are buying $2.5bn in art each year which accounts for a quarter of the $10bn investible art market, according to his calculations. He sees Abu Dhabi and soon, Saudi Arabia, close behind with this buying setting up a 10-year art boom:
That influx is being driven by the Middle East in particular, as vast museums spring up in Qatar and Abu Dhabi to create demand in areas which previously made up just a small part of the total market. Investors in these countries now have the finances to satisfy this demand and as a result their share of the market has increased exponentially.
“Qatar are buying about $2.5 billion of a $10 billion market … for their museum. Abu Dhabi are looking next, they’re building a huge museum. Saudi will probably be next”.
Last week, amidst an uncertain economic climate when “stock markets are sinking, debts are rising and the looming threat of double-dip recession cannot be entirely eliminated,” record breaking Modern and Contemporary auctions in New York ensure that the buoyancy of the sector is in plain view. In fact, according to this article in the New Statesman, over 50% of the most expensive auction sales of all time have taken place since 2008.
We all know that art has been viewed as an asset class for some time now, but more recently, it has been hailed with a new name and falls under the category of a “SWAG” asset.
According to Kamila Kocialkowska of the New Statesman:
The term, coined by analyst Joe Roseman of Investment Week denotes “alternate investments” which manage to defy economic gravity – namely silver, wine, art and gold.
As well as being decidedly sexier than the FTSE 100, the trend of investing in luxury assets makes a lot of economic common sense. SWAGs often outperform other equities in times of economic downturn for several logical reasons. Firstly, they benefit from the uniquely profitable principle of “scarcity economics” (their value is related to their rarity). Secondly, in an unsteady market, people are drawn to stability, and all the SWAG assets are durable – they have a historical precedence of desirability and can be bought and stored almost indefinitely. Lastly, as their returns are not related to the patterns of the stock market, they add a sensible diversity to any portfolio, the literal asset equivalent of not keeping all your eggs in one basket.
In 2011, the Financial Times reported that the art market made an 11 per cent return to its investors, a frantic outstripping of stock market return.
However, buyer beware, as the old saying goes. The contemporary art market is no easy place to tread.
It is wholly speculative and subjective, and therefore constitutionally unpredictable. The valuation of contemporary art, in particular, is based on a collection of changeable and changing opinions. It is constantly affected by external circumstances, and trends are capable of crashing out of fashion just as swiftly as they crashed it.
Still, it cannot be denied that the sector is prosperous, with more and more industries and businesses springing up as the demand for fine art continues to escalate. In today’s art market, there are art investment advisors with whom investors can consult, private banks offering advisory services to their clients, specialist companies such as “Fine Art Wealth Management and The Art Investor assisting buyers on making choices for bespoke portfolios which can maximise returns.”
Other industries have, too, sprung up in reaction to the demand of fine-art investment, notably the specialist storage port. Investment art is, emphatically, not bought to be hung on the wall. Instead, collectors are increasingly storing their assets in state-of-the-art warehouses.
These large-scale warehouses offer highly regulated storage controls with humidity and light protection as well as extensive on-site security. They also have a notably appeal to the money-minded collector in that they allow the temporary postponement of VAT and customs duty payments.
But with the increased view of art as a SWAG asset comes a great threat to the integral core values of art.
The implications of this are vast. Not only with regards to the valuation of art, but with an entire overhaul of its purpose. Art bought as an asset and stored, indefinitely in a warehouse, far from the damaging light of day denotes a new mode of art ownership – one where the object d’art is reduced to a purely monetary transaction.
Investment Art: A Beginners Guide (New Statesman)