Investing in Art

Jane sent me this interesting article from Bloomberg Business about buying/investing in art and three tips to follow, including buy out of style, buy obscure but important and buy outside the narrative. The article notes if collectors are interested in long term returns to stay away from postwar and contemporary art and look for bargains outside of what is being hyped in the media.

Bloomberg reports

Most people like to look at art, some people like to buy art, and almost no one likes to overpay for art. Yet that’s almost undoubtedly what’s going on in the hottest part of the market: postwar and contemporary art.

Sales of these works have ballooned from $260 million in 1995 to $7.8 billion last year. When a category that spans a mere seven decades accounts for 48 percent of 2014’s total fine art auction market, it’s safe to say that bargains in the field are few and far between.

People who collect for the long term may get more for their money by adapting the strategies of value investing. That means forgetting contemporary and postwar works and looking for unfashionable or neglected pieces with intrinsic value. “We need people to recognize that it’s still possible to collect without having vast resources,” says James Steward, director of the Princeton University Art Museum. “I try to steer people to the fact that if they buy counter to fashion, or something that hasn’t been discovered, there can be real opportunity.”

This isn’t about flipping art for profit; it’s about landing gems you find beautiful on their own terms and whose worth hasn’t been inflated beyond reason by speculators or hype.

Here are some approaches to buying outside the bubble.

1. Buy out of style

Art is like fashion—tastes change all the time. “The art market is cyclical,” says Inge Reist, director of the Center for the History of Collecting at the Frick Art Reference Library in New York. “Some artists go in and out of favor. If they’re talented enough and were popular enough, there’s a good chance they’ll come back.”

Take Adolphe Monticelli, one of the most famous artists during the 19th century. Vincent van Gogh considered him a mentor; Paul Cézanne apparently found inspiration in his landscapes; Oscar Wilde even lamented selling a Monticelli in De Profundis. But eventually the painter was eclipsed by the impressionists. His work languished for almost a century.

Recently there have been efforts to resuscitate his market. A 2008-09 exhibition in Marseille paired Monticelli with Van Gogh—an influential bit of curation that reminded collectors of the forgotten master. In 2013 a late Monticelli, Au Bord de la Rivière, Marseilles, sold at Sotheby’s in New York for $413,000, five times its high estimate. His overall market is still in a lull. But more than a few collectors are betting that Monticelli will be back in vogue soon.

2. Buy obscure but important

Some collecting categories remain improbably affordable because few people are aware they exist. How else to explain the prices of pre-Columbian art—the sculptures, vases, artifacts, and jewelry made in South and Central America from 13,000 B.C. to 1500 A.D.?

“I think a lot of people are surprised that there is authentic, ancient material with good provenance that is, relatively speaking, affordable,” says Stacy Goodman, a senior consultant for pre-Columbian art at Sotheby’s. “You can certainly buy a super-high-quality piece for under $10,000.”

A 2,000-year-old painted figure sold for $7,500 at Sotheby’s in New York in 2013. A 1,500-year-old Mochica shell necklace embedded with turquoise went for $5,400 at Christie’s in 2006, or about $2,000 less than a new gold-and-silver T necklace from Tiffany.

“I don’t follow what the gold value is from day to day,” Goodman says. “But certainly there are times that the value of the weight of a work is greater than the estimate” of what it would sell for at auction. A gold figurine that’s thousands of years old, in other words, sometimes costs less than it would if it were melted down and sold as an ingot.

3. Buy outside the narrative

The worth of any artist is tied to the perceived art-historical significance of the work. John Constable’s plein air oil paintings are prized because “there was a sense that he was a modernist, after the fact,” says Princeton’s Steward. “He can be accounted for very happily in the linear march of history.” Many of his paintings are already in museums; major works sell for millions when they come to auction. The Lock fetched a record $35 million at Christie’s in 2012.

Constables that don’t fit snugly within the plein air narrative, however, are comparative bargains. Many collectors ignore his portraits, painted indoors; one of them sold for only $28,000 at Christie’s in 2014. And a drawing of Salisbury Cathedral sold for a bit less than $25,000 at Bonhams in 2013, even though it was created during one of his desirable periods.

Another example: When Frederic Edwin Church, a founding member of the Hudson River School, sold his massive The Heart of the Andes in 1860 for $10,000, it was the highest price ever paid for an American painting. By the 1880s, though, “he began to look fuddy-duddy and homegrown,” says Evelyn Trebilcock, the curator of the Olana Partnership, a house museum dedicated to Church’s life and work. His prices fell into a slump that lasted 90 years. Only in 1979 did his market revive, when The Icebergs sold for about $2.5 million at Sotheby’s. Church’s giant oil paintings still sell for millions, but at auction collectors can find bargains among his smaller works. In 2013 an oil-on-paper study of bamboo sold for $27,500 at Bonhams, and a small landscape went for $25,000 at Christie’s.

Source: Bloomberg