The Artful Investor

Beauty is in the eye of the beholder, but price is determined by the market, writes Tara Loader Wilkinson

There’s an old adage among art buyers that says you should “buy what you love.” Traditionally, few would advise buying art for investment purposes. But as global markets yo-yo and the price of art continues to climb, a new generation of savvy investors is turning to the art market for diversification.

It’s a relatively recent phenomenon, says Jehan Chu, a Hong Kong-based art adviser who counsels not only on aesthetics, but also on appreciation. “Art as an investment used to be taboo; now it’s just another approach,” says Chu, who targets a return for his clients of 100 per cent to 300 per cent over three to five years, which he says is a “safe” estimate. “While it may be frowned upon by some, it’s much more part of the conversation of the art world today compared to even five years ago.”

Contemporary artists, both Asian and Western, remain extremely popular at big-money auctions. Take the Jeff Koons

Balloon Dog (Orange) that sold for US$58.4 million at Christie’s New York in 2013. Or Zeng Fanzhi’s The Last Supper, which sold for a record-breaking US$23.3 million at Sotheby’s Hong Kong in the same year. “The contemporary art sector has never been so competitive and speculative,” says Thierry Ehrmann, founder and chief executive of data provider Artprice.com.

In four years, global turnover achieved at art auctions has almost doubled since the slowdown of 2009/2010, according to Artprice. “The galloping speculation of the period between 2004 and 2007 is once more to the fore and the contemporary market is more affluent than during the micro-bubble of 2007,” Ehrmann adds.

It’s a sign that you won’t get a bargain buying these types of work, cautions Pascal de Sarthe, a veteran art dealer and founder of the De Sarthe Gallery in Hong Kong. He adds that investors interested in long-term appreciation should look at less fashionable genres and artists—and buy in the secondary market, not the primary.

“Contemporary art, by emerging artists, should be collected out of passion and not for speculative purposes,” says de Sarthe. “As a conservative and safer investment, I would rather focus on the secondary market.”

Unlike many of his contemporaries, de Sarthe is known for collecting as a business, rather than trying to buy “what you love.” He never keeps his prized pieces but sells at opportune moments. “For me, this is a business and things need to be run like a business,” he says.

Global banks like UBS, Citigroup, Deutsche Bank and JP Morgan boast large and world-famous art collections and inhouse art advisory teams. Wealthy private clients are offered advice on fine-tuning a collection through the bank’s wealth management arm, helping with anything from insurance and transport to reselling at the right opportunity. However, banks still take the traditional approach that art should be bought for art’s sake.

“Our clients are increasingly taking an interest in contemporary art, and in our own renowned corporate collection, which is on display in our offices around the world,” says Stephen Mccoubrey, curator of UBS Art Collection in Asia Pacific, Europe, the Middle East and Africa. He adds that neither he nor the bank advise UBS clients on art collection for investment.

Those that do see it as an investment, advise a good rule of thumb is to pick a rare, unprolific artist or a low-profile one. Many contemporary artists—koons and Damien Hirst, for example— have small armies of assistants on an assembly line who churn out hundreds of pieces. The artists simply approve the piece and sign it, which could mean the market will eventually be flooded and your work’s value may suffer as a result.

According to Artprice, one of the rarest and most valuable contemporary artists of the moment is Jonas Wood. Truly rare at auction five years ago, Wood, now represented by the Gagosian Gallery, has exploded this year. Fifteen works have already sold during 2015 in New York and London, including a record US$610,000 sale at Sotheby’s in May.

Winning a prize or having a first solo exhibition can catapult an artist’s value. After newcomer Danish-vietnamese artist Danh Vo won the Hugo Boss Prize in 2012 and then had an exhibition at the Guggenheim Museum in 2013, his prices soared. This year his work broke records when one sold for US$700,000.

Lesser-known artists promise more lucrative returns than household names. Chu points to Belgian artist Harold Ancart, whose paintings have risen by an average of five times during the past two years, and Bangkok-born Korakrit Arunanondchai and the late T’ang Haywen, whose values have both shot up by a factor of three in the past year or so.

Today, many collectors with an eye for investment are looking outside the traditional genres of impressionist, contemporary or post-war. Artcurial is a French auction house that recently launched in Hong Kong, specialising in some of the more unusual collectors’ items. Eric Leroy is the head of the comic strips department at Artcurial—a segment that he says has risen by 100 per cent in the past 10 years.

For example, Tintin in the Land of the Soviets (the first volume of The Adventures of Tintin by Belgian cartoonist Hergé) sold for around US$9,500 a decade ago, whereas a rare drawing of Tintin in Shanghai sold at a Hong Kong auction in October this year for HK$9.6 million (US$1.2 million).

“Comics are rising in popularity because a younger demographic find them particularly appealing,” says Leroy. “It’s a form of contemporary modern media that embodies and even demonstrates issues of importance, for example societal problems such as ecology. Comic books are popular because they capture treasured memories of youth. And they also serve as beautiful works of art for the walls.”

Leroy reckons comic printing plates will be a good investment during the next 10 years. “It is a strong market with new buyers from all around the world, and it is concurrently more and more difficult to find good and rare pieces.”

That art can be a reliable investment is clear. “Investing in art is on par with investing in stocks,” says Chu. “If you know what you are doing or have good advice, you can make good money.” But art has an advantage over stocks, he adds, because you can still enjoy a beautiful artwork if its value drops to zero. “And

that is why we always say: buy what you love.”

CONTEMPORARY ART BY EMERGING ARTISTS SHOULD BE COLLECTED OUT OF PASSION AND NOT FOR SPECULATIVE PURPOSES