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Luxury
Global art markets sizzle and dazzle wealthy investors
Part of the several trillion US dollars released thanks to Federal Reserve chairman’s Ben S. Bernanke continuing stimulus packages apart from trillions more in other top currencies printed by central banks across the globe have trickled into the art market, to prop it up. Specialists and experts in the field rightfully observe what’s driving the art market globally is that certain people have a lot of liquidity and are looking for places to put it.

Suzanne Gyorgy, the Citi Art Advisory (Citigroup’s private bank service) head, states, “For many people art is an interesting alternative investment. It’s seen as a hedge against inflation and a safe haven in the high end of the market.” The trend is very much clear! Increasingly, the wealthy are pumping their capital into luxury investments seen more as alternatives. A recent Forbes new report reveals that Steve Cohen, a hedge fund hotshot, paid more than $150 million (a record price according to market observers) for a Pablo Picasso piece earlier owned by billionaire Steve Wynn.

Columnist Agustino Fontevecchia mentions of ‘New era' for global art markets, referring to the recent Contemporary Sale of Christie's that witnessed extremely aggressive bidding from potential buyers. The much-awaited event witnessed good demand for several masterpieces. ‘Number 19’ by Jackson Pollock fetched over $58 million (including fees) achieving a world auction record for the artist. Along with three auctions of contemporary art, comprising Leonardo Di Caprio’s ‘Eleventh Hour’ sale, the spring week sales figure of Sotheby’s climbed to an impressive $638.6 million.

The post-War & contemporary art markets sure are red hot. Contemporary art sales have grown to about $6 billion last year from $850 million a decade ago in total value. According to artnet, this noteworthy development needs to be juxtaposed with a gradual fall in modern, impressionist & old masters’ prices. Another key trend is emergence of South-East Asian art and China’s uninterrupted rise as a global art powerhouse. Chinese buyers are more focused on their own artists. What this means is that they don’t create a huge effect on Western favorites like pop art and abstract impressionism.

In the last week of May, Evening Sale conducted by Christie's of Asian 20th Century & Contemporary Art in Hong Kong totaled $53,736,025, selling in excess of 90 percent by lot and 91 percent by value. It saw four new world auction records getting established: Singaporean artist Georgette Chen’s ‘Still Life with Tropical Fruits’ going for $656,565; ‘Nudes on Horseback’ Yun Gee (Zhu Yuanzhi) fetching $ 1,480,185, ‘PixCell-Coyote#3’ by Japan’s Kohei Nawa receiving $361,305 and ‘La marchande de riz’ (The Rice Seller) by Vietnam’s Nguyen Phan Chanh drawing $392,385.

Among ostensible investment avenues of ‘passion’, fine art is the one that has appreciated by almost 200 percent in the past decade or so, suggests the Luxury Investment Index of Knight Frank. The same is calculated on basis of the weighted performance of different indices for total nine classes of collectables, comprising fine art, classic cars, coins, Chinese ceramics, furniture, jewelry, watches, stamps, and fine wine. Investors are clearly taking a much closer look at all these real assets going beyond their emotional and aesthetic values. “What’s changing is the subtle investment angle perhaps,” a recent essay by the FT, UK columnist, Mariana Lemann quotes Knight Frank’s Wealth Report editor, Andrew Shirley, as saying, “Previously, people would like to collect so as to possess beautiful things and have the best possible collection. Traditional investments, however, have lost much of their intrinsic value and that the earlier neglected investments of passion are becoming attractive.”

The global art market’s sheer size makes it appear large and liquid in nature. It totaled nearly $61 bn in 2011 - estimated Clare McAndrew of Arts Economics, but it can still get topsy-turvy. The touch of allure carries its own high risks. “Still there’ve been several new buyers who are coming into the art market,” New York-based art expert and advisor, Mary Hoeveler, points out: “What apparently comes with that, sadly, is some amount of speculation. The Wall Street sure takes notice; people enter the market solely as investing.” Contemporary art tends to go in and out of public favor, cautions another expert. “When you're dealing with popular contemporary artists, keep in mind the fact that their career and popularity graph can change rapidly, and so also their work. Still, market appreciation is not the primary motivation of investors or it shouldn't be so, advisors state.

Fontevecchia cautions to state: “Art, along with real estate and other alternative investments, present a risky opportunity. While prices have risen exponentially, several pieces by top artists including Franz Kline and Jeff Koons failed to find buyers. At the same time, thin liquidity means prominent collectors with deep pockets, including the Mugrabis, Nahmads and megadealers like Larry Gagosian auction, can steer the market.”

To sum it up, venturing into the segment of fine art & collectables will demand immense caution as well as specialized advice from experienced experts in the field. You might love a piece at the first sight but the broader marketplace might not! The better idea would be looking at it both as a choice of passion and as an investment. What should come first and what will come later, is anybody's conjecture…