Skip to content

News

Stay informed with our art market insights.

Collecting + Investing
5.10.2021 by Jonathan Dodd

Table of Contents

- How should you invest in fine art
- What types of art to invest in fine art
- Where to invest in fine art

With so many factors to consider for investing in fine art, it is important to prepare and educate yourself when collecting artwork. In this article, Fine Art Brokers breaks down the steps to consider when it comes to investing in art. Check out our complete guide.

WHY are you investing in Art?

Let us assume you have already decided that buying art and/or investing in art is a good idea and worth considering, and you have seen some of the very convincing graphs and figures that show the gains that can be made. It’s then important to understand clearly why you personally might want to do so and what you might want from it.

Investing in art can take a number of forms, from spontaneous purchases that you love, and which might perhaps increase in value, to speculating in an informed way in an exciting and rewarding market. The important thing with investing in art, and which distinguishes it from simply buying art, is to go into it clear-sighted and with your aims, or at least your priorities, already set in your mind.

Thus, you might be:

  1. Buying art that you (and hopefully your partner) personally enjoy having on your walls;
  2. Buying art that you instinctively like and want to find out more about, as a hobby and intellectual exercise;
  3. Buying art that might be at the limits of your own aesthetics but which your children will want to inherit (aka Buying for the Next Generation);
  4. Buying art that will form into a coherent art collection, that will have value in its entirety and completeness;
  5. Buying art as an Alternative Asset Class, as part of your investment portfolio – for some this might be a bit of light relief from stocks and bonds, for others part of a strategic and researched plan;
  6. Buying art speculatively to trade every few years

You also need to anticipate when you hope to sell your artworks.

  1. Perhaps never, at least not in your lifetime - and that’s perhaps the highest aim of collecting art, to acquire
    works that you never want to sell.
  2. Or perhaps in 10-20 years when you anticipate downsizing and/or bequeathing works to your children or to
    your local museum.
  3. Or perhaps in 5 years’ time, as you want to keep the portfolio turning over.
  4. Or perhaps making a quick profit soon after purchase on some acquisitions which are in a rising market

At any given time, some artists’ works are generally more easily saleable than others, irrespective of value. This liquidity can be important with a short term investment. With a longer term investment, it is less important, and in any case is harder to predict.

Art investments of less than 5 years are unlikely to be highly profitable outside a real boom period, either for the market as a whole or a particular artist, unless you are very focused and informed in both your buying and selling. The transactional costs in the art market make it difficult for casual investors to see a profit in less than 5 years. The major auction houses now add around 26% buyers’ premium to the price bid, as well as charging the seller up to 10% (plus other charges such as insurance etc), plus local taxes on those charges. There are many, many examples of selling art at auction with huge gains, but if you buy a work at auction and then re-sell at auction, then it will need to have increased by around 40% in value just to break even. A number of dealers and savvy collectors now aggressively speculate in the contemporary market, especially among emerging artists where prices can fluctuate hugely, and can make big profits from flipping artworks within a year. But it’s a time-consuming job and like all gamblers the key is to be astute and hard-nosed enough to know when to cut your losses and move on. For most collectors it’s best to look at a 5-10 year plan, and as with all investments, to stay alert as opportunities present themselves for the best time to sell.

Sharing your aims with an art advisor will be invaluable and will enable your advisor to help you plan ahead and achieve exactly what you want. Most good advisors (including Fine Art Brokers) offer a free initial consultation that can really help you see the issues clearly and take the first steps to forming an art collection which should increase in value in the time-frame you want.

HOW should you invest in Art?

In discussing the best way to start investing in art, there are a number of constant factors that are always important to bear in mind, the eternal truths of how to successfully invest in fine art.

Buy the best you can afford
The ‘best’ isn’t necessarily the biggest, or flashiest or even what you think is the most commercial, but the finest example of that artist’s work, or of that type of artwork. In the current market, many of the wealthiest collectors want ‘trophies’ and tend to focus on 20th century and contemporary art, but really great works by unfashionable artists (say academic Victorians or the Hudson River School painters) hold their value and will continue to do so – but only if they are great and not just averagely good. If necessary, buy one really great work and a few very minor pieces; don’t go for three mediocre examples.

Typical is good
In the 1980s and 1990s when people decorated their homes with paintings (one over the mantel piece, smaller paintings in the niches either side, a seascape over the sideboard …) there was a very active market in interesting paintings by little-known names. Since 2000 or so the focus has moved firmly on to known artists. And if you are interested in a widely recognised artist, then the easiest to sell by far is the typical work, the type of work for which they are best known. It’s always interesting to diversify an art collection, to seek out rare and fascinating art, but for investment it’s usually best to buy the most easily recognizable examples.

Paintings drawings or prints?
As above it’s usually best to focus on the medium for which the artist is best known. For many artists that means focussing on their oil or acrylic paintings, but for some that can mean their works on paper, and for some like American Pop artists (such as Warhol and Lichtenstein) their prints have such an established market that they can prove as good a buy as their paintings, albeit at a much lower price point. One advantage of buying a print from a known edition, rather than a unique artwork, is that the market price is more easily established by comparison with others that have sold before. Meanwhile, although a sculptor might be best known for their original carvings or bronzes, and these are the obvious targets for investors, many sculptors (such as Henry Moore and Barbara Hepworth) draw beautifully and their watercolours and drawings can prove just as solid investments.

Do the boring detail, or have someone else do it
It’s important to check each potential purchase very thoroughly, as the seller might not be forthcoming with vital information unless explicitly asked. Is it in good condition? Is the authentication from the most recent recognised authority? Does the provenance stack up, and in some cases does it add value? With some artists the provenance and exhibition history are vital evidence of authenticity; for example, a Basquiat without a certificate or exhibition history in his lifetime is almost impossible to sell for a decent price. Is the artwork really as good an example as the seller claims? Has it perhaps failed to sell a number of times at auction or through a succession of dealers, suggesting some as yet unidentified flaw in the work? Are there any potential doubts about the authenticity, and is there any damning gossip about it? You probably don’t have the time or the inclination to immerse yourself that thoroughly in the art world, and so it’s money well spent to employ an art professional.

It’s OK to start slowly
It’s my experience that most buyers new to art collecting are quite understandably cautious at the beginning. They leave low bids on artworks, and so either underbid everything or only get the works that nobody else wanted. They make low offers to dealers that might antagonise the best dealers and allow the seller an opportunity to shed an unwanted and undesirable painting. But it’s a stage to go through, and the best collectors gradually pick up confidence in their own opinions (and the opinions of others). It’s worth building a little extra time into your plan, to allow for this initial period.

Keep transaction costs down if you can
As mentioned before, the high commissions charged by auction houses mean that the transaction costs eat into any potential profit for art investors. Private deals via dealers and advisors carry lower transaction costs. But they can rarely match the global ‘reach’ of the major auction houses, nor can they achieve the exceptional prices for certain types of artworks that are the result of market hype and/or wildly competitive bidding. Art market professionals who like to ‘flip’ paintings (sell within a year or two of buying) tend to focus on modern or contemporary artists whose prices are moving quickly and rely upon selling at the auction houses who both create and feed upon trends in the market and present them with the drama and sense of occasion to extract the very last bid. For those who look at keeping their purchases for 5-10 years or more, there are better opportunities to buy and sell privately through an agent, and often the transaction costs are simply more often forgotten. (Fine Art Brokers, for example charges between 5% and 15% depending on value).

Private acquisitions versus auction purchases
Easy access to auction prices means that anyone can see the price you paid for a work at auction. They can’t show whether you got an absolute bargain, nor whether you got carried away and paid over the odds. But the price always remains as a permanent benchmark for that artwork. A potential buyer might know nothing about the artist, but he knows that say in 2010 it sold for $100,000 and somehow, he imagines that he could have got it then and should still somehow be able to get it now for the same price. With a painting that has remained in private hands this benchmark never arises, comparable prices are always comparisons with a painting that is specifically not the same, it carries the allure of being ‘off-market’ and is therefore always worth a little bit more.

Keep your ear to the ground
The art market is always changing, and it can be both fun and profitable to keep an eye on all new developments. If you don’t have the time an art advisor can keep you up to date with edited highlights. Some subtle changes can hugely affect an artist’s prices. For instance, French Post-Impressionist art generally has not been the hottest market of the past few years, but prices for the best works by Achille Laugé have grown noticeably and continue to do so. Much of this is down to the appointment of Nicole Tamburini, an expert who authenticates the works and promotes Laugé, organises the estate, and especially curated a major exhibition of the artist’s work (with a terrific catalogue) in 2010. Thus Laugé’s ‘La route de Cailhau’ came up for auction in 2005 (before Tamburini’s catalogue) and sold for €180,000; the same painting came up at auction in 2017 and sold for £305,000.

Exhibitions can make a big difference to an artist’s market. The Frank Bowling exhibition at Tate Modern was more of a reflection of the artist’s standing than any sort of leg up, but by reaching so many young artists and collectors the effects of it are still being felt. In the autumn of 2021 there is going to be a major exhibition of the works of the 20th century British artist Dame Laura Knight. She’s a well-recorded artist, and still very popular among collectors of more traditional art, but as an exhaustive survey of between 70-90 artworks, a ‘holistic’ show as the exhibition’s curator described it to me, it will undoubtedly generate renewed interest in her works.

Investing in art should essentially be both rewarding and fun. An art advisor can help you stay in touch with the art markets, with new developments, and with news stories and local gossip. In many ways it’s like being welcomed to a private and fairly exclusive club, but one where you decide on the cost of subscription.

WHICH Artists and WHAT type of art to invest in?

Many new investors seeing art purely as an alternative asset class want to know: Which artist should I invest in? What type of art shows the best returns? What are the names of the artists whose works will definitely go up? Of course, these are questions that nobody can answer with any certainty, and anyone who gives you a shopping list of names is little better than the tipster who suggests putting your shirt on a horse in the Kentucky Derby. Predicting the really big money-spinners is akin to backing the 50-1 in a race, but there are informed judgements to be made and overall there’s a lot you can do to help your decision-making.

Look at the current market to anticipate where it might go
When one is trying to anticipate trends in the art market it makes sense to seek pointers from the year just gone. However, to state the obvious (and indeed to drastically understate it) 2020 was a weird year.
Oddly enough, while most art-related businesses and institutions have suffered, it hasn’t been quite so awful for the art market as a whole. In 2020 there has been a plethora of the most astonishing world records set at auction:

Most expensive Pokemon card - $236,000;
Most expensive single baseball card - $1.8m;
Most expensive pair of shoes - Michael Jordan’s own Nike Airs sold for $615,000;
Most expensive guitar – Kurt Cobain’s guitar sold for $6m;
Most expensive fossil – Stan the Dinosaur, a Tyrannosaurus Rex skeleton sold for $31.8m

In an article in the Art Newspaper in January 2021, Scott Reyburn identified a new species of buyers of ‘red-chip names’: “What appears to be different about today’s market is that the super-wealthy … are no longer buying a work with a view to a profitable resale. They are buying it because they just want it – and the bragging rights that go with it.”

There are always wealthy mavericks at the very top end of the market, whose purchases grab the headlines, but which have little impact on the main bulk of the art market. And there have long been super-wealthy trophy hunters who tick off names from a shopping list, from the early 20th century moguls who wanted Renoir, Monet and Cézanne, to more recent incarnations demanding Warhol, Basquiat, and Condo. But that trophy hunting mentality has spread further down the market, focussing attention on a handful of artists by name and ignoring the other 99%. Meanwhile we can expect that “buying because they just want it” mentality to spread further in the next few years.

Buying for the Next Generation
In the same article Scott Reyburn goes on to quote the Berlin-based art advisor Michael Short: “It seems to be all about which artist used an idea last, not who had the idea first. There is no sense of history.”

I think this represents a significant change in outlook, that is already widespread among the younger generations and is important for anyone whose idea of art investment is based upon buying artworks that their children will enjoy: Buying for the next generation. No longer are young collectors so concerned with an artwork as historical document, as a link with the past or with the painter’s own world; the priority is simply what it looks like. That reflects how art history is being taught in schools and universities – not the chronological succession taught to earlier generations, of European men from the Ancient Greeks onwards producing a neat chain of work culminating in Picasso, but a panoply of glittering artworks from around the world regardless of civilisation, race or gender. The focus is on the way artists and artworks can cross-fertilise and influence each other across the centuries, rather than being part of some chronological history lesson.

An obvious result of this is that the late paintings in an artist’s career, the posthumous casts of bronzes, and the endlessly repeated versions of the same image, are all much more sought-after than hitherto, and in the case of some artists’ late-career paintings they are now among the most desirable. They haven’t totally overthrown the traditional values of rarity and historical significance, but they are often good targets for investors.

Similarly, young artists are no longer taking their influences from traditional teaching and steady research, but initially finding them randomly from images on the internet and social media, in quite a scatter-gun way and then studying them in depth independently and in their own personal way. A quick survey I did among a group of artists under the age of 30, asking them to name their favourite painters, came up with some hardy perennials like Matisse, some predictable names like R B Kitaj and Robert Rauschenberg, and others simply influenced by recent blockbuster exhibitions like Frank Bowling. But also some names I did not expect: Georg Baselitz, Peter Doig, Michael Armitage, Antoni Tàpies, Bill Traylor and Forrest Bess. In buying art with one’s own next generation in mind, one could do worse than focus on some of these names who are influencing the next generation of artists.

Art and contemporary culture
While historically art buyers have collected art as a way of bringing them closer to a legendary artist or a lost world such as fin de siècle Paris or Manhattan in the 1950s, newer collectors see modern art as a way of connecting and engaging with contemporary culture. And so the issues of our time, the redressing of old injustices based on race and gender, and the concerted recalibration of society have directly affected the art market. These of course can be expected to continue for some time.

While many Black artists have come to the fore in 2020, the reputation of the late Barkley L Hendricks has leapt most dramatically. By the time he died in 2017, at the age of 72, his paintings were already selling for six figure sums. The month after his death two of his paintings sold at Sotheby’s for around $950,000. One of those works re-appeared in the same rooms in May 2019 and made $3.74 million. Last summer it was reported that a collector had privately acquired a large portrait by Hendricks for an eye-watering $14 million.

The living or the dead
An important aspect of art investment is supply and demand. Once an artist passes away then they leave behind a finite number of works in a limited number of defined and largely understood styles. A living artist continues to add to his oeuvre, and can make the stupid mistakes that can tarnish their reputation forever. Late in life Salvador Dali took to signing blank pieces of paper on which prints or drawings in his style could be added later – in the very late 1970s I remember hearing of a car being stopped at the German border with 8,000 sheets of paper all signed by Dali; it’s thought in 1976-77 alone he signed 17,000 blank sheets. The market in his prints has still not recovered from that.

It used to be said that one needed 50 years in which to truly make sense of something, be it an historical event or an artistic movement. Today, the vast amount of information available on the internet, and the immediate discourse and exchange of opinions on all media, means that reputations are made or lost very much more quickly. However, the death of an artist has become even more important as the time to reassess their reputation, and the reflection in the market value of their works is correspondingly more dramatic. It’s boring and obvious to state that it’s a tragedy that an artist often has to die to achieve fame, but more than ever it remains true.

One artist the art world has been talking about non-stop for the past year is the Canadian painter Matthew Wong. A wonderful artist who died tragically in 2019, his work has since attracted interest in all the right circles. Prior to 2020 not a single work by him had appeared at auction; by the end of that year 23 paintings had done so and two of them had sold for more than $4 million. While the market for his paintings might well continue to grow, and it is widely signalled to do so, it’s not a market for the faint-hearted and in truth it is already at a level where it is driven by billionaires wanting to acquire something rather than any sense of re-sale value. As a secure investment, the opportunity has probably already passed. But sadly for Wong had he lived it is unlikely that he would be so talked about.

Collecting and investing in art can be a hugely enjoyable way to stay engaged with contemporary culture and attitudes. Whether you are looking to treat it as an alternative asset class, or to try to acquire art that your children will like and might be able to sell for a good profit, if approached in the right way it can enrich your life while also (hopefully) enriching your pocket.

WHERE to invest in Fine Art

The global marketplace
It’s an often made point that the art world is now truly international, there’s no such thing as local market as information is shared equally around the globe. Meanwhile Covid restrictions have meant that we are all equally unable to view actual artworks and access to the market depends only on the quality of your internet connection whether you are in Manhattan or the Arctic Circle. For instance at Christie’s live-streamed Impressionist Modern & Contemporary art sales of October last year, 34% of buyers were from Asia, 33% from America, and 33% from Europe, the Middle East and Africa.

Meanwhile it’s interesting to watch artists who are emerging from simply being celebrated within their own country to becoming international names. For instance at a recent auction of Modern British Art at Bonham’s, a David Bomberg painting sold to a client from the American Mid-West, while a William Roberts watercolour sold to a buyer from the Far East. One of the directors noted afterwards not just the large number of overseas bidders, but the fact that they were prepared to spend large amounts of money without viewing the lots – a common phenomenon in times of Covid but one that will continue long afterwards.

Breaking through to the International Markets
With some artists of great quality, with a huge standing in their home country, international fame somehow eludes them. Over the past few years I have seen marvellous paintings by the French painter of Lyrical Abstraction, Georges Mathieu, and repeatedly been told that he is becoming better known in America and will break through to being a true international name. Yet it has never quite happened and even now, with the redoubtable Nahmad’s promoting his works, it’s still not happening yet.

When an artist makes that breakthrough into the international arena, whether within their lifetime or more often posthumously, it can have a huge impact on their prices. One that might be waiting to happen is Joan Miró. Although Miró is one of the most widely admired and collected 20th century artists of the 20th century, and indeed already one of the most expensive, as an ArtPrice analysis from November 2018 pointed out he “has not yet penetrated the world’s largest marketplace… China.” That is in spite of the fact his later works especially were inspired by Far Eastern paintings and art theories, So theoretically there’s enormous room for growth in his market, and especially for works on paper which Chinese collectors like in a way that traditionally most new collectors don’t.

Certain national characteristics remain deeply entrenched, and tastes still vary from country to country. In the 20th century many artists divided their time between different countries, and today their works can be viewed differently by collectors from those countries. Thus for instance (and this is a very broad generalisation) American collectors of Alexander Calder’s gouaches prize most highly the ones with clearly defined shapes each standing independent of the other; whereas in France, where he painted many of the gouaches, collectors often like the more fluid and diffused ‘underwater’ compositions. Similarly (and again as a broad generalisation) with Sam Francis’s abstract expressionist works, Americans tend to prefer the fuller compositions, almost with the maximum number of dots and splashes, whereas French and Belgian collectors often see the concept of the ‘void’ as central to his work even if it occupies three quarters of the composition.

Local markets
Sometimes the international market can throw up strange anomalies. For instance, during the 1980s there was a huge surge in the popularity of French Post-Impressionist paintings by artists like Henri Le Sidaner and Henri Martin, many of which were acquired by American collectors. So much so that perhaps the majority of these works moved across the Atlantic. Traditionally most British and French dealers would tell you that of course you have the best choice of European paintings at the best prices if you buy them in Europe – QED as we used to say, or duh as we say now – but oddly enough today it is sometimes easier and cheaper to find good decorative Post-Impressionist paintings in America than it is in their native France.

Many dealers and advisors are specialists in their particular region, perhaps moving paintings between one or two other countries. Fine Art Brokers not only has the huge advantage of being based in both London and New York, with an office in Paris, but we also have approximately 40 years’ specialist experience of buying art throughout Europe and exporting it around the world. While arbitrage might not be as applicable as it used to be to investing in art, local knowledge of the vagaries of each country’s art market remains invaluable. We are happy to share this knowledge with our clients.