Rules for Investing in Art

Bloomberg has an article which lists some rules for investing from the perspective of an art collector. The main  points mentioned for investing in art include dont look for the quick profit, invest for the long term, be patient, focus on specific areas of style or mediums, and lend and exhibit works when possbile.

Bloomberg reports

Bob Rennie is a buy-and-hold kind of guy.

At 18, he scraped together $375 to buy his first artwork, a print by Norman Rockwell. Now 58, the Vancouver real-estate entrepreneur has a private museum that houses his collection of more than 1,400 works. He still owns the Rockwell and says he’ll never part with it.

For the growing number of wealthy investors who are entering the art market, Rennie offers a few rules: Diversify the portfolio, buy for the long term and cultivate connoisseurship.

“We can’t pretend that art is not an asset,” Rennie said last month as he walked through the Armory Show, the largest contemporary art fair in New York. “It has to be managed.”

The founder of Rennie Marketing Systems, a real estate sales, marketing and risk management company, estimates that a third of his art holdings rise in value “astronomically.” Another third barely keeps up with bank rates, he said, and one third was purchased as an intellectual pursuit and is unlikely to rise in value. About 140 works represent 75 percent of the total value of his collection.

“At the time of the acquisition, you don’t know which one is which,” he said, referring to the three groupings.

In 2009, Rennie opened a private museum in the oldest building of Vancouver’s Chinatown district. Operating the museum and managing the collection of about 200 artists including John Baldessari, Mike Kelley and Christopher Wool costs $75,000 a month, he said. He regularly lends to public museums and has sold only five artworks in the past 10 years, he said.

Quick Profit
Rennie’s experience may hold a lesson for the increasing number of wealthy investors seeking a quick profit from surging prices for contemporary works. The Artnet C50 Index, which combines performance data of top 50 postwar and contemporary artists, rose 170 percent from 2004 to 2014. During the same period, the Standard & Poor’s 500 Stock Index gained 85 percent.

“He is a prescient collector,” Madeleine Grynsztejn, the Pritzker Director of Museum of Contemporary Art Chicago, said about Rennie. “When he commits he really commits.”

Kerry James Marshall is one 40 artists Rennie collects “in depth,” meaning he owns at least 20 works by each, spanning the artist’s entire career. He was so enamored with Marshall’s painting “Garden Party” that he waited 10 years to buy it.

Marshall started the painting, which depicts a summer gathering at his Chicago backyard, in 2003. In the ensuing years, demand for his work surged, along with his prices.

Very Patient
“Every time he saw Kerry, Bob would mention the painting and how much he would love to own it,” said Jack Shainman, whose New York gallery has represented Marshall since 1993.

Rennie’s patience paid off, in the form of a discount. In 2012 Shainman sold him the work at the 2006 price of $450,000. Its current market value is more than $1 million.

“Selling to the Rennie collection is like selling to a museum,” said Shainman. “You don’t have to worry about him flipping anything.”

Rennie said he has an acquisition budget, declining to specify the amount. To be sure, sometimes his rules turn out to be guidelines.

“I probably exceed it by three times each year,” he said of his budget. “Something always comes up that you must have.”
Like a group of three paintings by Marshall, each 8-feet-tall and 18-feet-wide, that he glimpsed on a 2012 visit to the artist’s studio. The palette of the three works forms a giant Afro-American flag. He knew the trio had to remain together.
“Nobody is going to do that,” Rennie recalled Marshall telling him. “Too big and too much.”

Four Areas
The asking price was substantial: more than $1 million, which was the upper end of Rennie’s budget. His collection focuses on four central areas: social injustice, appropriation, painting and photography. Marshall’s trio was painting; it incorporated social commentary and appropriated elements of other artists’ works.

“It speaks to three disciplines within the collection,” said Rennie. “It doesn’t get better than that.”

The works went on a three-museum tour in Europe in 2014 and will be included in Marshall’s solo exhibition at the Rennie Collection in 2018.

“You are hopefully lending to our Kerry James Marshall retrospective,” Grynsztejn told Rennie when she bumped into him at the VIP opening of the Armory Show on March 4. “We’ve got overlapping programs.”

MCA Chicago will open its Marshall show in April 2016, co-organized by the Museum of Contemporary Art in Los Angeles and the Metropolitan Museum of Art in New York.

Museum Loans
By lending to museums and organizing his own exhibitions, Rennie has built a reputation as a generous custodian, dealers said. This helps him get access to the best works by artists he covets. Being included in prestigious exhibitions also boosts the works’ value.

To create liquidity, he said he borrows 8 percent of the total value of his art holdings and puts the money back into real estate. New York-based Citigroup Inc.’s Citi Private Bank finances the collection.

“Bob has a great eye and finds artists way before they are on anyone else’s radar,” said Suzanne Gyorgy, head of Citi’s art advisory and finance group.

Female Figures
Jeanne Greenberg Rohatyn’s Salon 94 gallery in New York recently sold Rennie a group of five large canvases by Lorna Simpson, the first paintings by the black artist known for her conceptual photography. Rennie already owns Simpson’s “1957-2009,” a work that consists of 306 small photographs.

“There was a lot of competition for these works,” Greenberg Rohatyn said. Rennie won because she thought he would take care of them “better than anyone else.”

The 9-foot-tall paintings depicting female figures will be shown at the Venice Biennale opening in May. Simpson and Marshall are among five artists from the Rennie Collection selected to participate in the prestigious Italian biennial.

While Rennie initially planned to buy just two paintings, he later decided it was important to keep Simpson’s entire Venice installation together. He declined to reveal how much the group cost, saying it was as financially “uncomfortable for me as the three paintings by Kerry James Marshall.”

“The best investment I can make is to keep art,” Rennie said.

Source: Bloomberg