THE ART OF THE DEAL
Last year, the world had more than 2,600 billionaires, many of whom like to park fortunes in the rapidly growing art market, writes christopher dewolf
Preserving wealth in the arts
The global art market is worth at least US$67 billion, according to the Swiss bank UBS, and it’s growing faster than the economies of most countries. So it’s only natural that most of the world’s richest people have become art collectors. But what exactly are they buying, and are they driven by passion, profit or both?
“Twenty years ago, they were mostly real collectors, professionals and art lovers,” says Hong Kong-based art adviser Kyoko Tamura. “These days, especially in the past five years, I’ve seen a surge of art investors who are not afraid to say that’s what they do. They’re still buying works for themselves, but mostly for resale and to make a profit. [These are] very market-driven purchases focused on monetary gain.”
Tamura is one half of Ticolat Tamura, the art-advisory firm she’s run with Mathieu Ticolat since 2012. Based on Duddell Street in the heart of the city’s blue-chip art district, where worldleading dealers such as Larry Gagosian and David Zwirner ply their trade, the firm helps connect collectors with the art they’re seeking.
The wealthiest collectors are looking for “blue chips only”, says Tamura. And which artist is the bluest of the blue chips? “Basquiat is one of the first artists on the wish list of many high-net-worth individuals.”
There’s no greater symbol of how contemporary art has become one of the world’s most valuable currencies than JeanMichel Basquiat. Born in New York to Haitian and Puerto Rican parents, Basquiat started out as a graffiti writer before his neo-expressionist paintings, art films and music made him a pillar of the downtown Manhattan art scene. By the mid1980s, he was earning US$1.4 million a year making art, and eager collectors were already being priced out of the market for one of his paintings.
Their value skyrocketed after Basquiat died from a heroin overdose in 1988 at the age of 27. Four years ago, Japanese tech entrepreneur Yusaku Maezawa bought an untitled Basquiat work from 1982 for US$57.3 million, a record for the artist. A year later, he paid a staggering US$110.5 million for another unnamed Basquiat piece, also from 1982. Maezawa
THE GLOBAL ART MARKET IS WORTH AT LEAST US$67 BILLION AND IT’S GROWING FASTER THAN THE ECONOMIES OF MOST COUNTRIES
announced his acquisition on Instagram, posing in front of the painting – of a skull that Basquiat created with a stick and spray paint – while dressed casually in black canvas trainers, black jeans, a T-shirt printed with black circles and red lips, and a black windbreaker.
Collectors such as Maezawa have existed for centuries. What’s different today is that there are just so many of them throwing their money around. According to the Wealth-X Billionaire Census, the world had 2,604 billionaires last year who each owned, on average, US$31 million-worth of art. Many of the collections consist of work by artists who have become household names, such as Jeff Koons, Gerhard Richter, Damien Hirst and Yayoi Kusama. There are also a few surprises, like Vija Celmins, the relatively overlooked artist whose limited output of hyper-realistic illustrations is coveted by collectors. “Billionaires are begging to buy this art. Too bad,” declared a Bloomberg Businessweek headline last year.
Much of the art being collected by the world’s ultra-highnet-worth individuals has been tirelessly promoted by a network of influential, well-connected dealers. That’s how Basquiat achieved such success before his death and it’s still how the global art market works today. In his 2019 book Boom: Mad Money, Mega Dealers, and the Rise of Contemporary Art, writer Michael Shnayerson chronicles how a generation of dealers with roots in the 1960s helped cultivate the current boom in contemporary art. “They have the clout to promote an artist over a period of years and orchestrate his or her success,” he writes.
Dealers hype up artists through their global networks of galleries. Sometimes they even snatch up paintings at auction and hold on to them for years, waiting as their value creeps upwards before selling them at great profit to a collector.
Shnayerson traces this system back to a dealer named Leo Castelli, who married into a wealthy New York family in the 1950s and started selling art out of his father-in-law’s townhouse. He soon began representing leading modern artists such as Roy Lichtenstein and Cy Twombly, whom he paid a monthly allowance in exchange for selling their art and keeping 50 percent of the proceeds. Castelli mentored a young generation of dealers that included Larry Gagosian, who tapped into Castelli’s network to build an empire that now stretches around the world. “The higher the prices, the more his wealthy clients vied to pay, hoping that the more they paid, the more valuable their new works would become,” is how Shnayerson depicts the system Gagosian has perfected.
The result is that art now resembles any other global industry. In 2018, market analysts Artprice launched the Artprice100, an index of blue-chip artists whose performance mirrors that of bluechip stocks such as those in the S&P 500. “A collector who, at the start of this year, invested in the 100 most successful artists of the last five years, would already be looking at a value accretion of almost a sixth in the value of his/her portfolio,” Artprice CEO Thierry Ehrmann declared last summer. Among the best performing artists of the past year: Andy Warhol, Fu Baoshi, Zao Wou-Ki and Wu Guanzhong.
When billionaires manage to snag works by one of those artists, they may display them at home, or in a private museum. But mostly they sit in bonded warehouses where they’re exempt
from taxes. “For some collectors, viewing illuminated PDFs of their art, instead of the real thing, was worth the pleasure of avoiding that tax bite,” writes Shnayerson.
It’s a system that lends itself well to misdeeds. Art is the perfect vehicle for laundering money, thanks to lax regulatory oversight that allows most transactions to be shrouded in secrecy. After he was convicted in Brazil of financial crimes, banker Edemar Cid Ferreira surreptitiously shipped a US$8 million Basquiat painting from the Netherlands to the United States, marking its value as US$100 on a customs declaration. His trick was eventually discovered, but many others have no doubt managed to get away with similar acts of evasion.
In his book, Shnayerson describes an art scam that’s rumoured to be pervasive in London’s property market. Fraudsters buy art for several hundred thousand dollars, then doctor the sales receipts to boost the cost massively. After buying insurance for the inflated value, they take out bank loans against the paintings and use them to fund a property development.
It’s almost enough to forget that art has value beyond its financial worth. Yusaku Maezawa may be cannily boosting the value of his investments by breaking record after record, but there’s no doubt he’s a genuine Basquiat superfan.
“I think it’s fair to say that most collectors would prefer their collections at least to hold their value and while it may not be the primary consideration, market value is something of which most collectors are aware,” says Magnus Renfrew, who founded ArtHK and sold it to Art Basel in 2013. But Renfrew, who now runs the new Taipei Dangdai fair in Taiwan, is an optimist. He’s convinced that, even with billions of dollars on the line, the art market is first and foremost driven by the beguiling qualities of art itself.
“Often collectors who start collecting for investment get hooked,” he says. “Passion becomes the key driver and investment becomes less important.” Business is always more fun when it’s mixed with pleasure – and few things are as pleasurable as a provocative piece of art.
DEALERS HYPE UP ARTISTS THROUGH THEIR GLOBAL NETWORKS OF GALLERIES