investing alternatives

Art as a passion investment

As an investment, art is best viewed as a passion investment. But art’s inherent “value” is less financial than cultural. Most art works do not appreciate significantly. We do rigorous, in-depth art historical and economic research for our range of clients. While are happy to help clients make investment decisions, we carefully manage their expectations.

Some people approach art strictly as an asset class. As investors, they frequently engage in a “pack” mentality, favoring and, often, ultimately creating art commodities or art currencies. (Warhol and Basquiat are unquestionably commodity classes.) There is nothing wrong with this. But there are many more losers than winners in this approach.

The majority of collectors ask, as a final question in the purchasing process, “Is it likely that this art asset will appreciate?” For them, they act initially on passion and preference, and finally on cost and economic appreciation. It is not uncommon to hear a collector talk about his “art debt.” But there is—in fact—the ever-looming question of value.

Understanding value

In our view, value can be placed on a work of art in several different ways:

• Historical significance—museum and independent curators, art historians, and critics bestow “canonical” value on a piece of art. This may or may not have an effect on a work's monetary value.

• Monetary value—this is determined by the marketplace, which is made up of artists, art buyers, dealers, auction houses, and collectors. Supply and demand often determines monetary value. Yet, a host of situations can affect these two forces, pushing the monetary value up or down. Moreover, one must keep in mind that liquidity is variable, largely dependent on market conditions.

• Philanthropic value—gifts or donations of art can sometimes be made to art museums and other nonprofits. Of course, a work of art must be significant, or seen to have potential for becoming significant, and must also be seen as adding value to an institution’s collection. Only then does an artwork have a monetary value for tax purposes.

Art investments

"The more things change, the more they stay the same.” 

For several years, the art, fashion and business media has been abuzz about:

• the extraordinary growth of the art market until a downturn resulting from the global financial crisis of 2008

• a resurgence since 2012, particularly in the top strata of the brand names at auction, and

• the more recent slowdown due to “collector fatigue.”

The art market has always been a business sector subject to fads and fashions and sometimes volatile business cycles. This has been true from the Antwerp fairs of the 1500s to the present. Much of the older, most desirable modern and Post-War art is already in museums or private collections. This is why contemporary art has become so popular as an investment. There are few slumbering giants, waiting to be rediscovered. In fact, rediscovered artists are typically poor candidates for acquisition.

We recommend our clients read A History of the Western Art Market, A Sourcebook of Writings on Artists, Dealers, and Markets. The book may sound like a formidable read. In fact, it is a very accessible selection of informed opinions and revealing readings. 

We do art historical and market and economic research for both our collector and investor clients. We are happy to help clients make wise art investment decisions. We caution that art markets fluctuates, just like financial markets. Art is best viewed as a passion investment.