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The Courtauld Institute of Art

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On the Global Art Market

November 20, 2015

The global art market is booming, with last year’s sales reaching a record £37bn, a 7pc year-on-year increase and a little above the 2007 high of £35bn, according to the most recent figures from the European Fine Art Foundation.

 

In April 2015 The Telegraph reported that, “Investors are being warned not to rush in to investing in art, amid reports of surging returns.” This is a statement that undercuts and radically oversimplifies the current growth in the economy of the art market. This recent spike in investment interest is replicated on the other end of the financial spectrum. Morgan Stanley’s private wealth management arm recently founded the Blue Rider Group. The name is a somewhat peculiar homage to the European iconoclastic art movement Der Blaue Rieter. This group focuses on the acquisition of treasure assets for ultra high net worth individuals and institutions. Dan Desmond, a founding member of the group, said “Having an understanding of our clients' collections is important for us when constructing investment portfolios, advising on a sale, analyzing the collateral for a loan or guiding tax efficient planning.”

 

Although they also aim to organize interactions between their clients as a means of cultivating a network of investors who are both financially and culturally motivated it cannot be denied that Blue Rider Group’s focus is its financial aspirations. Understandably so, 2014 art sales reached an all time high of £37bn. This is an impressive 7pc year-on-year increase. It is clear that in this period of economic recovery with the gap between the richest and the poorest ever increasing the luxury market is benefitting greatly. Arts investment has often been criticized as lacking in a quick return, being subjective and illiquid. The contemporary market is volatile, however investing in antiques or old masters provides a greater probability of financial gain on the asset. The Blue Rider presents itself as a trustworthy investment to its clients through their knowledge of art history, the mechanics of the art market and general wealth management. This means that they can time the sales of auctions right, for example it was no accident that the Sotheby’s Ai Weiwei auction took place midway through his greatest retrospective exhibition at the RA.

 

The value of art does not generally appreciate by great margins in mere months, however those who hold onto their investments for five to ten years can expect to see a significant return at around 4pc according to Melanie Gerlis, author of “Art as Investment?”. Subjectivity in the art market has long been a scapegoat for those who would condemn art as a poor investment. In real terms there are two manners of considering subjectivity in regards to investment. Primarily, subjectivity is the preserve of the critic, the curator or the gallery owner, those with a vested financial interest in the success of an artist, work or school. The definition, by such a person, of what is en vogue invariably dictates the economics of the art market, however the influence of the critic on the art market is ever decreasing due to the impact of online platforms. Every purchase which is dictated by pre-established trends is an objective one, based on a financial motivation, rather than the pure aesthetic considerations of the investor. Secondarily, subjectivity in the sense of the individual’s tastes and interests can still be beneficial to arts investments. As with all markets, and perhaps more so with the art market due to the personal nature of the subject and the fact that it is unregulated, values are susceptible to fluctuation. It could be assumed that any investment in art for pure financial gain would be a risky one and there is wisdom in only purchasing the art that is personally valuable to the investor. Furthermore, in the  June 2015 edition of Barclay’s Wealth Insights publication, entitled “Profit or Pleasure? Exploring the Motivations Behind Treasure Trends” it was revealed that 69% of those surveyed believed that ‘value is dictated by public taste rather than intrinsic worth’.

 

In considering the current boom in general investment interests, the spike in profits of the art market and the pervading sense of uncertainty over what to buy it is perhaps unsurprising that there are those who would be quick to urge investors to be wary of fine art. It is not an investment for those who want to ‘get rich quick’. It should be viewed as a long term interest, something to enrich the cultural lives of those invested, regardless of whether it is a consideration of portfolio diversification or genuine appreciation. The monetization of art may be deemed unsettling however, arts investment should be encouraged as it is necessary for the continuing development of contemporary art and the conservation of culturally rich pieces. Arts investment is a necessary evil.

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