Andy Warhol once said “Making money is art”. But what about making money from art?
A boom in the global market has delivered some eye-popping returns in the past few years, drawing new collectors keen to invest in an asset class that offers cultural as well as financial appreciation.
Irish horse breeder John Magnier will get at least $150 million for a painting of a nude by Amedeo Modigliani on May 14 in New York at Sotheby’s, thanks to a third-party guarantee. He paid $26.9 million for the work in 2003.
For many investors, the market has grown too big to ignore. Last year global sales reached $63.7 billion, according to an Art Basel and UBS report … But the market is opaque, unregulated and sometimes extremely illiquid. Gallery owners and auction houses charge commissions of 25 percent or more, sometimes negotiable and art buyers must avoid the pitfalls of forgeries, fakes and rapidly changing tastes.
“In the art market there are no rules, that’s why it is such a minefield and why it has such opportunities,” says Wendy Goldsmith, a London-based adviser in modern and contemporary art. “When I start with a new client, half my job is to say no, especially to people from finance who think because they can master one market they can master any market.”
While some collectors have made fortunes, Goldsmith says the world is littered with warehouses of art that have depreciated as much as 90 percent. To help navigate these treacherous waters, we asked three of the world’s most successful art buyers for advice on starting a collection.
Uli and Rita Sigg
Uli Sigg, 72, has amassed probably the world’s most comprehensive collection of Chinese contemporary art, having bought more than 2,500 works since the late 1990s when he was the Swiss ambassador to China. When he started, China had only one commercial gallery and Sigg traversed the country visiting artists in their studios and buying up works from the likes of Ai Weiwei, Zhang Xiaogang and Zeng Fengzhi. Even the most expensive items cost him little more than $10,000 at the time. Today many of them sell for millions.
Today’s art market is a far cry from 20 years ago. The Internet and a proliferation of art fairs has made more art accessible to more people than ever before. Buyers from Europe, the Middle East and China are all chasing the same works.
“The time available to make a decision has shortened dramatically,” says Sigg. “Now, when you go to an art fair, you have one hour to decide whether or not to spend that one million dollars.”
Do your homework first, he advises. Once a work catches your eye, read up as much as you can about the artist and scour the Internet for past sales results on auction house websites and third party providers such as Artnet and Artprice. Check the C.V. too. The chances of appreciation in value are much better when an artist’s works have been featured in reputable galleries or acquired by major museums, Sigg says.
Kim & Lito Camacho
Today, they have more than 100 of Kusama’s works, as well as several nude bondage photographs by Nobuyoshi Araki, and around 85 abstract and experimental paintings from Japan’s avant-garde 1960s Gutai movement. Their works by Atsuko Tanaka and Kazuo Shiraga have appreciated about ninefold in the past 10-12 years. “When the market values it more than I do, I let it go, when I value a piece more than the market does, I buy,” says Kim.
Fairs are a great opportunity to get exposure to all kinds of art, especially for neophytes who might otherwise find walking into a private gallery intimidating. With as many as 5,000 works on display at the bigger events like Art Basel, it’s best to have a strategy mapped out in advance.
“Do not be impulsive,” cautions Lito. “It’s like going to a pet shop where every puppy is cute, street dog or pure bred. Do your research and don’t buy some random artist on day one.”
J Tomilson and Janine Hill
“Nobody wakes up one morning and says I want to be a collector,” says Tom Hill, 69, the billionaire vice chairman of Blackstone Group. He and his wife Janine started buying art to decorate the walls of their first New York apartment in 1980, acquiring some still-life oils by 19th century Danish painter Johan Laurentz Jensen. “It’s not like anybody has a pre-conceived idea of an endgame. Collecting is an iterative process.”
For the Hills, the next iteration was Italian renaissance and baroque bronzes, followed in the 1990s by pop-art superstar Warhol.
“Back then, Warhol was literally in the doghouse from the market’s point of view, so I bought a hand-painted Campbell’s soup can for like $400,000,” Hill says. In 2010, a similar-sized soup can painting sold for $9 million at auction.
Hill recommends selecting artists and works that appeal to you artistically, rather than worrying too much about how the work will perform in the short term. “Markets are fickle and you gotta buy it because you like it,” he says. “When you chase something that is really great, you pay more than it is worth at that moment.”
Most of all, building a successful collection is a long term ambition as you gain knowledge and experience. Just like other investments, there will be losses as well as gains.
© ORIGINAL ARTICLE BY
Frederik Balfour | bloomberg.com
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