• David Grammig

Art as Investment? By art historian and private wealth art manager Dr. Annette Doms

Updated: Jun 3, 2019

“Being good in business is the most fascinating kind of art. Making money is art and working is art and good business is the best art.”

(Andy Warhol)

Most art collectors distance themselves from the idea to collect for investment reasons. But to be honest, hardly anyone is sad when the beloved collection has increased in value. Of course, to discover art or artists requires a trained eye, knowledge, experience and a good gut feeling. Not every artist becomes famous. The experienced collector does not care. He or she lives from the daily dialogue with art. Even bad investments are valued. After all, it's about the point of view. A true collector collects with passion and is not motivated by money.

Besides the art collector there is the group of art investors. Art allows you to earn a lot of money, if you know the mechanisms of the market. Art investors come from the business world, have little time and are looking to increase financial returns. This has been picked up by many advisers, offering overpriced art pieces only to get rich themselves. Greed is human and you have to be careful: A special Picasso is not to be equated to just any Picasso. As with many other artists, the value depends on the quality of the work, the authenticity, the maturity of the market, the scarcity of works from an artist, the provenance and the period in which a work was created. If you really want to make money from acquiring art, you have to look closely to find the right piece for the right price.

The art market is not easy to see through. It consists of a conglomeration of micro markets and nobody knows how big the market actually is. Measured against the automobile industry it is comparatively low with a total global turnover of USD 63.7 billion in 2017.

The possibilities of increasing value in the field of art exist and the reason is the emergence of new art buyers worldwide like Asia (especially Taiwan, China, South Korea and Indonesia), the Gulf States (with Qatar and the United Arab Emirates) or India - markets with plenty of disposable cash have pushed prices upwards. Asia, in particular, is creating billionaires faster than anywhere else and buyers from the Millennial generation have developed an intellectual interest in art. Money is certainly invested well in art because of the art's mobile and decorative character and serve well as status symbols.

Claude Monet's "Meules"

Examples for the possible multiplication of art pieces' values are e.g. the painting "Meules" by the impressionist Claude Monet, which was auctioned in May 2019 for 110.7 million dollars (98.8 million euros) in the auction house Sotheby's. In its previous auction 33 years ago, "Meules" went to the highest bidder for 2.53 million dollars. One of the world's most expensive painting - an act by the Italian painter Amedeo Modigliani was auctioned in 2018 for $ 157 million. The previous owner paid less than one sixth of the proceeds for "Nu couché (sur le côté gauche)" in 2003.

These are extremes, but there are several examples in the one to two-digit million range, where value has increased many times over in a short time of time. Much of this remains unnoticed since private sales are rather a rule than an exception. The advantages for a private purchase or sale are the absolute discretion, a faster settlement and lower commissions than in the auction market, where - depending on the auction price - additional charges are to be paid, for example seller’s commissions (between 2% and 20%) and buyer’s premiums (usually between 12.5% and 25%).

How crazy the art market can get is also reflected in the sensational price trend of the American artist Brian Donnelly (born 1974), called KAWS. His works, which are often inspired by popular cartoon and child figures, have earned exorbitant prices in some markets, most recently in Hong Kong. The street art artist Banksy made a similar splash. His work "Girl with Balloon", despite its staged destruction during an auction, scored 1.04 million pounds and thus made history.

There will never be a lack of stories concerning art investments - stories of success as well as failure. In order to make a successful art investment it is highly advisable to consult an independent expert.

Dr. Annette Doms, May 2019

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