A fine romance

It seems that the fine art market is enjoying a purple patch, making it an appealing proposition for investors – but, as with any alternative asset class, it pays to do your research up front

On 15 November 2017 at Christies in New York, Salvator Mundi, a Renaissance portrait of Christ attributed to Leonardo da Vinci, sold at auction for $450.3 million, shattering the record price for a painting. Given that this represented a return for the seller of more than $300 million since it last appeared for auction in 2013, even those who’ve never previously thought of investing in art may pause for thought. 

While such headline-grabbing sales are outliers rather than regular occurrences, even the most cursory glance at reports over the past 10 years reveals a global fine art market that continues to remain in rude health, despite a decade of economic and political upheavals. The European Fine Art Fair (TEFAF) annual report 2017, for example, reveals that global fine art sales in 2016 amounted to $45bn.

One of the first puzzles that a new investor encounters is, what exactly is ‘fine art’? The term once referred to objects whose only purpose was aesthetic, as opposed to the ‘applied arts’ or ‘crafts’ – those practices such as ceramics, furniture and textiles which produce primarily functional objects. 

Since the turn of the 1900s, however, artists have broadened their practices to include these materials and processes – Picasso, for example, made many ceramic works, and the definition of fine art has expanded to include almost anything an artist chooses to turn their hand to. 

These days, a fine art sale can include almost any form of art or material, from painting and sculpture to maps, tapestries and photographs – or even nautical models. 

Historically, the fine art market has weathered global economic storms, partially as a result of the confidence that art’s status as a tangible asset class inspires, but also because of the way in which the dynamics of the collecting market can shift. 

Chris Clifford, Director of CCASM Modern and Contemporary, an art consultancy based in Jersey, points to a shift that was seen in the profile of global collectors around the financial crash of 2008.

“There was a sense that established collectors from Europe and America were being more cautious. But that gap in the pool of buyers was quickly filled by new high-wealth individuals from emerging markets such as China and Russia, who didn’t feel so exposed to risk,” he explains. Indeed, the TEFAF report describes the market as undergoing “a shift rather than a shrinkage”.

While these shifts in the profile of collectors have functioned as a bulwark against the slings and arrows of global finance, combined with broader changes in global culture, they’ve also contributed to changes in global taste, particularly when looking at individual artists or movements. Clifford cites an increase in collectors of the Arte Povera movement as a good example. 

In the late 1980s, global collectors hungered for works that embodied a celebration of wealth and consumerism. Pop Artists such as Jeff Koons produced artworks that were highly finished, glossy, brash, and often deliberately banal celebrations of their own status as consumer products.

In interviews, Koons, who had spent time as a Wall Street commodity broker, presented himself as a businessman rather than an artist. It was a strategy that led to Koons being one of the most sought-after artists of the 1980s. 

Yet as the recessions of the early 1990s hit America and Europe, the taste for ostentatious displays of wealth began to fade. For younger wealthy collectors, many emerging from the socially liberal atmosphere of Hollywood and a nascent Silicon Valley, the modest appearance and cerebral meanings of Arte Povera felt a better fit for their portfolios and for the public images of collectors themselves. 

Those who caught this shift early were rewarded as an academic reappraisal of these artists took place and national collections staged major retrospective exhibitions, raising the visibility of the movement as a whole and, in turn, the value of the individual works.

Guiding hand

With a market so strongly influenced by immeasurable, unpredictable and subjective forces such as ‘taste’, and which has its own rarefied and specialist language developed over hundreds of years by an international network of gallerists, practitioners and academics, it’s clear that anyone new to collecting needs a reliable and trustworthy guide to navigate this labyrinthine world.  

Increasingly, these guides are taking the form of consultants and private dealers. Such has the importance of these independent advisers risen that private dealer sales have now overtaken auction sales – once the backbone of the industry. 

In part, this is due to the privacy and discretion that conducting sales and purchases away from the headline-grabbing environment of the public auction can afford. But the private dealer can also offer a one-to-one relationship and access to a wide range of expertise.

Cory Fuller of Gladwell & Patterson, a Knightsbridge-based dealership with a 250-year history specialising in modern and contemporary painting, stresses the importance of this personal relationship. “It’s important to remember that auction houses have to balance the competing interests of the seller and the buyer, whereas we work for the buyer only.” 

So what are the risks and pitfalls that a good art adviser can help you avoid? As with any investment, due diligence is a must and in the art world, the provenance and authenticity of an artwork are key to ensuring that you’re getting what you think you’ve paid for.

Greta Pender, Senior Trust Manager at Saffery Champness, describes provenance as “an unbroken chain of evidence that links the work to the artist.” 

In the modern and contemporary markets, provenance can include a wide range of documentary evidence, from receipts and ledger books from the original sale, to a framer’s label on the back of a painting, contemporary photographs and newspaper reviews – anything that can track the journey of the work from the original artist to the current owner. 

In the Old Masters market, however, the fragility and scarcity of surviving documentation can lead to breaks in the chain of evidence. In these cases, a consensus among art historians, curators and dealers is vital. Hence the Salvator Mundi is categorised as being ‘attributed to’ rather than ‘by’ Leonardo as, despite a huge consensus that he did indeed paint it, absolute proof is unavailable.

In this area of research, once largely conducted in dusty archives and libraries, digital technology has had a perhaps surprising impact. Prender highlights the increasing use of blockchain technology in assembling a work’s provenance. “Now we can compile all this information and copies of documents into one file which we can pass on to the client,” she says. 

In this case, the ‘unbroken chain’ and any changes made to it are permanently recorded and embedded into the architecture of the digital file itself.

Burden of proof

And yet provenance isn’t the whole story. Once you’ve established that there are records of the artist producing the work, you must next prove that the work itself isn’t a copy or a forgery. 

Traditionally, the proof of authenticity has been in the purview of connoisseurs – respected experts whose study of a particular school or artist enables them to identify such minute details as an artist’s characteristic brushstrokes. But scientific advances in imaging and the chemical analysis of materials used have moved this process into the laboratory. Here again, a good dealer will have access to this technical expertise through a network of contacts within the academic institutions that conduct this sort of analysis.

Pender, Clifford and Fuller all stress the need for doing your research – both in terms of the works themselves and the dealer or adviser you choose to be your guide through the art world. As Fuller says: “You need to research your dealer as much as the art.” 

In the case of a dealership such as Gladwell & Patterson, a 250-year record of satisfied collectors is a solid indicator of reputation and expertise. But beyond that, digital technology is increasing transparency by making it easier for collectors to research the pedigree of artworks and dealers, with websites such as Artnet.com, Artsy.net and Artprice making auction and sales records freely available. 

Clifford agrees that the increased transparency the digital revolution has brought can only be a good thing for collectors. “When the market was centred around a handful of commercial galleries, there was no benchmark, no ability to make comparisons, but now the market is becoming demystified and democratised.”

Another consideration is hidden costs. While the headline price for Salvator Mundi was $450 million, $50 million of that was the auction house’s commission. 

In addition, there may be other costs that need to be considered. As Pender highlights: “Will an export licence be needed? Does the work have any special storage, conservation or handling needs? What about insurance?” Uncovering these costs is a key function of a good art adviser. 

So, are there any particular artists, schools or movements that offer a good starting place for the new collector? Twentieth century art has traditionally been one of the strongest areas, with Chinese and European painters making up the top 20 artists by sales in 2016. 

Fuller cites Impressionism as a good example of a modern movement that traditionally performs well in terms of sales, but also offers opportunities to the newcomer.  “You have your ‘big brands’ like Claude Monet whose work always sells at headline prices, but there are lesser known artists such as Gustave L’Oiseau and Mary Cassatt, and across the modern movements there are plenty of artists who are unknown outside art history circles,” he says. 

As these lesser known artists are researched and re-evaluated, new passions are ignited among collectors and it can take only a couple of high-price sales to push that artist’s work into the big leagues.

So, what should the guiding principal be for the new collector taking their first steps into art investment? For Fuller, an awareness of both quality and price is primary “We advise collectors to buy the best they can with their money. They may have their eyes on a work coming up at auction, but with our contacts, we may well be able to find a better work by the same artist for sale at a lower price from another source.” 

In this world, where such apparently intangible factors as taste and passion compete with monetary value, what should lead – the heart, the passion and the love of art, or the head and the bottom line? In the final analysis, it has to be a careful balance of both. Or, as Pender says: “Just because the heart leads, it doesn’t mean the head should be asleep.”