Investment
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The Art of Collecting and Investing in Art
Gecko Gallery features a selection of investment quality works that have been placed with us for resale. All have excellent provenance. Your enquiries are welcome.Art provides the world with a sensory experience like no other. To own a piece of this world is a dream, to view it a privilege and to earn a rate of return on it, a bonus. Not only can art be a good investment, but art is also an asset that offers aesthetic enjoyment. Unlike most other ‘investments’, you can enjoy art every day without reducing its value. In fact, art has the unique and enduring benefit of potential appreciation in value as it hangs on your wall. Applying an investment strategy of ‘buy and hold which has long been regarded as a key to successful wealth creation is a pleasure when the ‘hold’ part of the strategy is so visually rewarding. Also, as a collector of Australian art, you are also participating in the support of Australian artists and visual culture. This has unquantifiable rewards.
In 1904, Andre Level, a French Financier, persuaded twelve other investors to contribute two hundred and twelve francs apiece to an investment fund called La Peaude l’Ours (the skin of the bear) which was targeted at an unusual market: modern art. Over the next ten years, the fund bought more than a hundred paintings and drawings, including major work by Picasso and Matisse before selling off the entire collection in a giant auction a the Hote Drouot in Paris on March 2 1914. Some paintings sold for more than ten times their original price and the partners found they had quadrupled their initial investments. It took another 90 years for their idea to hit the mainstream with numerous art-only investment funds looking to cash in on what equates to a world wide art market boom. For example: in 2004, Picasso’s ‘Boy with a Pipe’ which had sold in 1950 for US$30,000, went at auction for US$104 million!
Unlike property and shares, quality art to some degree is insulated from the volatility of investment markets providing vital diversification. The art market is considerably less sensitive to economic crises and geopolitical events that effect many other main stream investments. Compared to many alternative investments, art can also involve comparatively low transaction and holding costs. However! The adage ‘Buyer Beware’ is a powerful message for a commodity that is increasingly being seen as an opportunity for profitering. Authenticity and provenance are all important when considering art for investment as well as understanding that to realise the full potential, a commitment to retain such an acquisition for the medium to long term is essential. Therefore, it is vital to understand your objectives about investing in art – is it pleasure first or financial rewards you seek?
While there is a general perception that an artist's death significantly impacts his price structure, this very often is only so when they are relatively famous, their work is sought after, they are in demand and collectible, and most importantly, their market has been well established prior to their death. This was evidenced in the months immediately following the death of Brett Whitely for example when his market accelerated significantly before correcting to a more sustainable level.
When an artist dies after a long life with celebrated achievement however, their market changes have generally taken place slowly, sensibly, and it is hoped, in response to the support they may have achieved in public and prominent private collections. In the case of high profile artists such as Arthur Boyd, their death can precipitate a comparatively brief initial buying frenzy. The announcement of Boyd’s passing coincided with a major auction period in Melbourne and this had an instantaneous impact of 'celebrity buying' which for some resulted in some highly desirable, albeit, costly acquisitions. Others found themselves the owners of some minor works at inflated prices they might otherwise not have considered bidding on. In Boyd’s case, as an artist who had a strong market and institutional profile that identifies him among the fathers of modern art in Australia, the market rapidly slowed while maintaining the appropriate values for his major works.
In some instances, an artist's value may show a reversal of fortunes. For example, an executor or family may mismanage the estate by ‘dumping’ a large body of work on the market at once which can make buyers very nervous. Another reason for a decline in prices is when collectors patronise an artist more for his personality, media image, flamboyance, social contacts, or sales skills than for the quality of their art. With the artist's number one promoter gone (namely him/herself), there is little substance to sustain interest. A detrimental effect on price can happen when a major collector (usually in the private sector) divests themselves of a number of prominent works in a short space of time, often through the auction system. This causes nervousness in the market place with assumptions of loss of status and therefore perceived values are affected.
This is collecting at the high end. However, in approaching the acquisition of art and in particular Aboriginal art, these principles can be applied at all levels with a fundamental word of advice.
Buying a work of art is a very personal exercise and should engage you passionately if this acquisition is to become part of your lived environment. If you intend to spend a comparatively high amount of money, it is wise to also consider whether the work will hold its value and has the potential to increase over time. It is entirely possible to please both needs in collecting art, but if you are looking at art as investment always take professional advice, tempered with your own opinion.
There are several aspects to consider when investing in art. These include:
- Part of a portfolio - art forms one aspect of a balanced investment package
- Superannuation - art is purchased to be realised at retirement *(see Investing in Art for Super)
- Cultural gifts program - gifting to recognised institutions and receiving taxation incentives to the value of the artwork. * (refer to the Tax Incentive for the Arts Scheme)
A final word.
Never loose sight of the fact that art is a creative and, in most instances, an original and unique practice. Appreciation of a work of art ideally starts out as a personal and even sensual experience and if this leads to the creation of a collection and an appreciating asset; that is a wonderful thing.
Belinda Cornish
Director
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