Buying art in a less-than-bullish market
Combining passion purchases with sound investment decisions can be tricky. With early signs that art prices may be faltering, we look at how to choose the perfect piece.
The art market has been delivering strong returns for several years now, shrugging off the economic woes of the pandemic, as auction houses and galleries alike embraced online sales. However, recent art fair figures suggested that the market might be cooling.1 Frieze New York generally saw sales prices below $1 million (£790,000) in May. Sotheby's2 and Christie's3 both reported recent sales that were either just meeting expectations or underwhelming.
Art's appeal as an alternative investment in recent years is partly due to it being relatively uncorrelated with traditional assets. During the financial crisis, art prices for the top 100 artists were estimated to drop by 26-28%, while the S&P 500 fell 56% from its peak. As diversifying assets go, art is a relatively low-maintenance purchase: houses and boats are far more expensive to own than a painting.
The art market didn't suffer as much during the pandemic as traditional financial markets either. The S&P 500 lost 34% of its value by August 2020, whereas in 2020 global sales of art and antiques dropped by 22% year-on-year, with many Blue Chip artists actually seeing large value increases.
What's a collector to do?
Of course, art is almost always a passion purchase rather than a purely economic investment. So what should collectors consider when looking to buy? It can be easy to get side-lined by how much it will be worth in ten years' time, says Marlies Verhoeven, CEO and Founder of global arts club The Cultivist. However, the most important thing is that you enjoy the piece: “If you love it, you can't go wrong.”
Kate Sweeney, Art Consultant and Owner of Perspective – Art in Architecture, is currently commissioning the art for all the Schroders global offices. When choosing what to put in a space, she aims for conversation starters. “Even if somebody dislikes a genre of artwork, it’s still evoking an emotion and a conversation that garners interest. It's doing its job. If somebody just walks by without observing, it might as well be wallpaper,” she explains.
Jake Michael Singer's “Hum and Murmur”: London's 1-54 Contemporary African Art Fair is recommended for collectors looking for exciting new artists
Going digital: from PDF sales to immersive experiences
Arguably recent flat prices may just be a correction from pandemic pricing, as auction houses and galleries embraced digital sales. "We always thought people would get comfortable with buying online, but Covid exponentially shortened that timeline," explains Marlies. "Pre-Covid the average online price was about $10,000. During the pandemic, people started buying million-dollar artworks sight unseen, that’s something we hadn’t seen before in top auctions. That is a permanent change,” she argues. This has had a lasting impact on the way that galleries, art fairs and auction houses operate, with high-value artworks now being sold from so-called PDF previews before the fairs even open.
This isn’t the only digital trend that is making waves in the art world. NFTs continue to be divisive, meanwhile using technology to create immersive art and AI-created art is taking the industry by storm. A recent show by Refik Anadol displaying a two-storey-high digital canvas, with art coming out of the frame to its audience was created by machine learning and garnered rave reviews and queues around the block. The Cultivist allows its members to access exhibitions and studios all over the world, without being sold to by commercial organisations. Benefits include group viewings, access to sold-out museum shows and personalised itineraries for art lovers who are travelling to new cities. When Refik Anadol recently opened his Los Angeles studio to Cultivist members, it was one of the most popular visits that Cultivist has ever hosted, says Marlies. “People often think digital art just means NFTs, but the real trend is towards experiential artworks powered by machine learning and AI. It’s an important distinction and widely respected by the art world,” she explains.
In a bid to find the perfect artwork, Kate prefers to commission artists. Similar to buying art online, commissioning site-specific art means putting full faith in the artists as buyers don’t see the finished product until it is installed. There are plenty of steps you can take to make this more comfortable as a buyer though. “You never want to try to change an artist. Give the artist as much freedom as possible,” advises Kate. “You don’t want to make a sculptor do a painting or vice versa.” However, if you collaborate with your artists during the creation process, you might discover a direction in their portfolio that you prefer. This allows you to tailor the path they go down, while the artist remains in their comfort zone, Kate suggests.
She describes art as “the icing on the cake” for a property or space. “While it’s the finishing touch, it’s often the one element that everybody sees and everybody has a comment on.”
Of course, finding the right artwork for an office space is very different to a home. When working with private clients, Kate finds that she has to work harder to balance the tastes of individual family members. They may not have a deadline either, or a space in mind. “They might be buying art that they like, but they have no idea where it will be displayed. Whereas with the big organisations, it’s very much about the space and the architecture and the feel you’re creating. It can be very different, depending on your client,” she explains.
When asked what advice she would offer to those looking to commission artwork, she said: “Don’t be afraid of experimenting with younger artists.” Indeed, all of the art Kate has chosen for the Schroders offices is commissioned, usually from younger artists who have trained locally to the offices.
Where to shop?
If you don’t yet want to commission a piece of art, Kate suggests exploring as much as possible. “The more you see, the more you can sense what you love and what you don’t. Try to do your homework as much as possible,” she says.
To see a broader range of works, she recommends visiting local and international art fairs such as Photo London. It’s a photographic art fair that tends to have affordable pieces and a wide range of techniques. “It’s not just straightforward photography, there’s an eclectic mix of experimental approaches with a lot of depth to it.”
She also recommends the 1-54 Contemporary African Art Fair, which includes paintings, sculptures and many other mediums. “There’s a whole new group of artists coming out of Africa who are definitely worth exploring.”
Marlies and her husband only buy art if they have a “true connection” with it. “We don’t collect for commercial gain. We’re not selling art,” she explains. Marlies argues that collecting is something that you love, or you don’t. “It’s in your DNA,” she adds. They often buy from female artists as they believe they are often under-appreciated and under-valued.
When asked to name some of them, Marlies objected that that was “like picking children!” But she went on to name Mary Corse, Cecily Brown and Joan Mitchell, but also younger artists LaKela Brown, Julia Chang, LeeLee Kimmel, Pamela Council and Sam Moyer.
“At first you want to have it all, then you run out of wall space,” she adds. “When you’re ten years into collecting, you become more critical.”
Simon Fujiwara’s “Who vs Who vs Who?” at Art Basel – one of the most prestigious art fairs in the world.
1 Europe’s art market faces chill wind blowing in from the US | Financial Times (ft.com)
2 Louise Bourgeois’s record-breaking $32.8m Spider crawls to top of Sotheby’s contemporary art sale (theartnewspaper.com)
3 Late real estate developer Gerald Fineberg’s collection comes up short at Christie’s New York (theartnewspaper.com)
This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.
This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.
All data contained within this document is sourced from Cazenove Capital unless otherwise stated.