Art History Business

Is Buying Art as an Investment a Good Idea? Don’t Think So.

Thinking about buying art as an investment? Think again.

Buying art purely as an investment is a very risky business, in my opinion.

This morning I read an article in El Economista about Javier Lumbreras, the founder and director of the Artemundi Global Fund (AGF) where he talks about how there is no doubt in his mind that collecting art is currently the best investment as it will never lose its value, it is anti-inflation, the risk is very low, and the art market is booming. A few big figures were thrown in here and there by the author of the article, Vicente Gutierrez, like the fact that the art market is currently a $60 B I L L I O N dollar industry (Oh my!). However, Gutierrez failed to specify the minor detail that these $60 billion dollars don’t represent fine art sales; they encompass everything from luxury goods to real estate, to wines and memorabilia, decorative art and contemporary art. It is a very fragmented market and so that massive figure presented on its own is very, and I mean very, misleading.

This article got me thinking because Mr. Lumbreras is a very respectable man in the art and banking world. He is a devoted art collector, a private art consultant and a published author who at the end of the day has an intimidating reputation. Although it is not my intention to criticize him, I simply disagree with the confidence that he places in art as an asset class, and his sales pitch.

Let me explain a few things first. In the past decade or so there has been special emphasis made on art as an asset class because globalization has increased the market’s boundaries and there are new buyers with new motivations that want, as Mr. Lumbreras mentions, an asset that has low correlation, “low” risk, and that diversifies their investment portfolio. Totally understandable, right? Similarly, wealth management groups have also started adding new “services” to their accounts because competition is increasing and clients need to be satisfied.

Please don’t start thinking that this is another “market bubble”. That term is so overrated in my opinion and this is just the market’s natural progression. Times are changing.

Let’s continue. Yes, there are certain artists from whom you can expect and/or predict return but for others, especially contemporary artists, it is a battlefield. For example, Clyfford Still is an artist who you can be absolutely sure will always make a good return as there is a very small supply of his work and the rest is in the best museums around the world. However, Clyfford Stills are not exactly cheap. The last one sold at auction in November 2012 for $61.7 million. Not just pennies and dimes. On the other hand, an artist like Damian Hirst is a risky and unpredictable investment as for example, in 2008 when he had the Sotheby’s solo auction of his work that totaled at £111 million it seemed as though his market was hot. However, at the same time one of his representatives, White Cube gallery published their Sales & Stocks where many Hirsts appeared to be unsold. Strange, huh? Since it’s difficult to understand the artist’s supply and demand, results can be deceiving and misleading to possible buyers that are specifically looking to invest in art.

According to little old me, this is the problem(s) with buying art as an investment:

  1. The lack of transparency or liquidity in art as it is a collectable. If all of a sudden you need cash, you must find a buyer and sell the work which is easier said than done. Moreover, the economical climate both in the art market and globally might not be adequate at the time, especially when dealing with contemporary art.
  2. There is no standardized method of valuing art as finding the right expertise is not always easy and to a certain extent (after its provenance has been cleared) appraising a work is subjective. Don’t kid yourself.
  3. There is no system or model for measuring market demand: Prices reached at auction do not, I repeat, do not reflect the amount of people interested in the work. At the same time we are all in the dark about an artist’s primary market, its supply and prices. So how are we supposed to make an “informed” decision when investing?
  4. Buying art is not just about buying; its operating costs have to be taken care of. This includes cleaning the artwork, keeping it safe and paying its insurance. If something happens to the work, there goes your investment.
  5. The art market inevitably and to some extent is tied to the volatile global economy. Must I mention the 2008 collapse of Lehman Brothers? Part of that year and 2009 were sloooooowwwww years for the art market due to the recession.
  6. Depending on what you buy, there is always the risk of buying fakes and forgeries. If you are rolling your eyes as you read this, trust me, you’d be surprised how common they actually are. Forgers are not just copying a work but creating new works that in theory fill missing gaps in an artist’s repertoire. The most important German conman of the 21st century, Wolgang Beltracchi who was sentenced last year to only six years in jail after admitting to having forged hundreds of paintings by 20th century masters went as far as to invent a collector (his deceased father in-law) and his art collection to prove the works’ authenticity. Google him if you don’t believe me.
  7. There is a certain psychological twist in the matter of buying art as an investment. When someone says, “you should buy this, it’s a great investment” you can’t deny that something clicks inside of you. It’s almost like a reassurance that although you are about to freeze and hang X amount of dollars on your wall, it’s okay because it is bound to make a good return. It is not that easy, sorry to break it to you.
  8. Lastly, the most cliché reason of all, but to me it is the essence of the market: the art market is unregulated and opaque. There, I said it.

I think that we need to accept art for what it is before assessing it from a financial point of view as we first need to understand its underlying risks. Art is different from any other asset; that is the reality. Firms like Mei & Moses and Art Maket Research have created market indices that unfortunately are not suitable or reliable as investment tools but rather as ‘trend spotters’ in the market. It might be worthwhile to stop fighting this reality, understand it, and approach the matter from a different point of view.

So if you are one of the people that are thinking about buying art solely as an investment, my suggestion to you is to take $30 dollars, log on to Amazon and buy The Story of Art by E.H. Gombrich. If you know nothing about art then go, fall in love with it and then, start buying. That will be all the reassurance you will need.

Clyfford Still, sold at the Sotheby's New York November Post-War and Contemporary art sale for $61.7 million.
Clyfford Still, sold at the Sotheby’s New York November 2012 Post-War and Contemporary art sale for $61.7 million. Image: Bloomberg
Damian Hirst at his 2008 two day solo sale at Sotheby's. IMG: guardian.co.uk
Damian Hirst at his 2008 two day solo sale at Sotheby’s. Image: guardian.co.uk

El Economista, Invertir en arte, un gran negocio http://eleconomista.com.mx/entretenimiento/2013/03/06/invertir-arte-gran-negocio

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Comprar arte como inversión será una buena idea? No lo creo.

En mi opinión comprar arte únicamente por inversión es muy riesgoso.

Esta mañana leí un artículo en El Economista sobre Javier Lumbreras, el fundador y director de Artemundi Global Fund (AGF) en el que habla  de cómo no le queda duda alguna que coleccionar arte sea actualmente la mejor inversión gracias a que nunca pierde su valor, es anti-inflación, el riesgo es muy bajo y el mercado del arte está en ascenso. Unas cuantas cifras cómo el valor del mercado del arte en $60 B I L L O N E S de dólares fueron lanzadas por Vicente Gutiérrez, el autor del artículo. Sin embargo Gutiérrez no logró especificar ese pequeño detalle acerca de que los $60 billones no representan solamente las ventas de bellas artes, engloban todo. Desde lujosos bienes hasta inmobiliaria, vinos, memorabilia, arte decorativo y arte contemporáneo. En este mercado ampliamente fragmentado esa cantidad exorbitante puesta por si misma es muy, pero muy engañadora.

El artículo me puso a pensar ya que el Sr. Lumbreras es un hombre muy respetable el mundo del arte y la banca. Es un devoto coleccionista de art, consultor privado y un autor publicado que al final del día tiene una reputación intimidante. A su vez no es que quiera criticarlo, simplemente difiero en la confianza con la que él vende el concepto del arte como un bien.

Déjame explicar unas cuantas cosas primero. En la década pasada o hace un poco más, ha habido un gran énfasis en el arte como un bien, ya que la globalización ha incrementado los límites del mercado y han surgido nuevos compradores con nuevas motivaciones que buscan lo que el Sr. Lumbreras menciona, tal como un bien que tenga una correlación baja, que tenga un “bajo” riesgo y que diversifique el portafolio de inversión. ¿Perfectamente entendible, cierto? Similarmente grupos de manejo de riquezas también han empezado a añadir nuevos “servicios” a sus cuentas ya que la competencia se ha incrementado y tienen que satisfacer a sus clientes.

Hágame el favor de no pensar que esto es otra “burbuja del mercado”, es sólo la progresión natural del mercado. Los tiempos están cambiando.

Sí. Hay ciertos artistas de los cuales puedes esperar y/o predecir una ganancia pero para otros, especialmente los artistas contemporáneos es un campo de batalla. Por ejemplo, Clyfford Still es un artista del cual usted puede estar absolutamente seguro de que va a darle una buena ganancia, ya que la cantidad de su obra es muy limitada y el resto se encuentra en los mejores museos alrededor del mundo. No obstante, los Clyfford Stills no se venden por docena. El último que se  subastó en noviembre del 2012 se fue por $61.7 millones de dólares. Por el otro lado, un artista como Damien Hirst es un riesgo y una inversión impredecible, por ejemplo: en el 2008 cuando tuvo su propia subasta en Sotheby’s que se valuó en £111 parecía que su mercado era muy popular. Sin embargo, al mismo tiempo la galería White Cube publicó un documento con el inventario de la galería en ese momento y con las ventas del año en los cuales mucha obra de Hirst aparecía disponible. ¿Extraño, no?  Ya que es difícil entender la mercancía del artista y la demanda, los resultados pueden ser engañosos y malinterpretados por posibles compradores que están buscando invertir en arte.

Así que cuál es el problema(s) en comprar arte como inversión?

1.- La falta de transparencia o liquidez en el arte. Si de pronto necesitas efectivo, sólo tienen que encontrar un comprador y vender la obra, lo cuál se dice más fácil de lo que realmente se hace. Además, el clima económico en los mercados del arte y el global puede que no sea adecuado en el momento, especialmente cuando se trata de arte contemporáneo.

2.- No hay métodos estandarizados para valuar arte porque encontrar al experto adecuado no es siempre fácil y hasta cierto punto (después de que su procedencia es declarada) valuar una obra es subjetivo.

3.- No hay sistema o modelo para medir las demandas del mercado: Los precios alcanzados en las subastas no reflejan la cantidad de gente interesada en la obra, y al mismo tiempo todos estamos ciegos ante el mercado primario de los artistas. Así que, ¿cómo debemos de tomar una decisión “informada” al invertir?

4.- Comprar arte no sólo se trata de comprar. Sus costos de operación se tienen que prever. Esto incluye limpiar la obra, mantenerla a salvo y pagar su seguro. Si algo le pasa a la obra, ahí va tu inversión.

5.- Inevitablemente el mercado del arte está atado a la volátil economía global. ¿Debo mencionar de nuevo el colapso de Lehman Brothers en el 2008? Gracias a la recesión, parte de ese año y el 2009 fueron muuuuyyyyy lentos para el mercado del arte.

6.- Dependiendo de que quieras comprar siempre existe el riego de comprar copias y falsificaciones. Los falsificadores no sólo están copiando, sino que están creando nuevas obras que en teoría llenan los espacios vacíos del repertorio del artista entre periodos. El estafador alemán mas importante de la segunda parte del siglo XXI Wolgang Beltracchi fue sentenciado el año pasado a sólo seis años de prisión después de admitir que había falsificado cientos de pinturas de los maestros del siglo XX. Llegó tan lejos hasta inventar a un coleccionista (su finado suegro) y su colección de arte para probar la autenticidad de las obras.

7.- Esta es la razón más cliché de todas pero para mi es la esencia del mercado: El mercado del arte es irregular y opaco. ¡Ahí está, lo dije!

Así que si usted es una de esas personas que está pensando en comprar arte solamente como una inversión, mi sugerencia es que tome $30 dólares, entre a Amazon y compre  The Story of Art por E.H. Gombrich.  Enamórese del arte y luego, empiece a comprar.

20 comments on “Is Buying Art as an Investment a Good Idea? Don’t Think So.

  1. Fernando Botero

    Buenisimo. Me encanto !!!!!!!!!!!!!!!!!!!!!!!!!!!

  2. Rossana Núñez Bachmann

    Me encanto como cierra el articulo. Ojala todos los coleccinistas “light” leyeran a Gombich. El arte no tiene precio es algo espiritual. Una obra te tiene que decir algo, llegarte al corazón.

    • Hola Rossana,

      Muchas gracias por tu comentario y que bueno que te gusto el articulo. Tienes razón, Gombrich es lo máximo. Otro libro suyo que me gusta mucho es “A Little History of the World”, te lo recomiendo por si no lo haz leído. Yo creo que el arte transmite muchas emociones mas alla del dinero. Desafortunadamente hoy en día mucha gente piensa que el precio de una obra refleja calidad pero no es así.

  3. dianisafdeye

    So well said and such truth spoken! Couldnt agree more! Thank you for that fresh air….time are always changing…

  4. ESTA BUENISIMO, Y HACES UNA ACOTACIONES ESPECTACULARES, ESTO PODRIA GENERAR LA ELABORACION DE UN LIBRO COMPLETO. COMO MBA DE EAFIT Y DESPUES DE HABER COMENZADO A PINTAR Y OIR TU HERMOSA MAESTRIA EN “ART BUSINESS” SE ME GENERARON CANTIDADES DE PREGUNTAS RELACIONADAS CON EL TEMA QUE LENTAMENTE IRE INVESTIGANDO, IGUAL TENGO QUE ESCRIBIR UN ENSAYO PERO AL FINAL.
    EN LO RELACIONADO CON GOMBRICH Y LO QUE GENERA UNA OBRA DE ARTE, HAY MANIFESTACIONES EN NUESTRO CEREBRO QUE ESTAN POR ESCRIBIR, ESTO ES DENOMINADO “INTERPRETACION NEUROPSICOLOGICA DEL ARTE”. Y SIGO CONVENCIDO QUE EL ARTE SIEMPRE GENERA “SEGUNDOS DE ENERGIA POSTIVA” (SEP) PEQUEÑOS MOMENTOS EN LOS CUALES TODO EN EL INTERIOR SE SIENTE BIEN, PAZ Y TRANQUILIDAD INTERIOR.
    TE FELICITO ESTA ESTA MUYYYY BUENO

    • Erick me encanta tu reaccion al articulo! Que bueno que te gusto, fue algo totalmente diferente para mi escribir algo asi, lleno de finanzas y economia! El dia que escribas tu ensayo me gustaria leerlo. Si encuentro libros relacionados a este tema te contare para que los leas.
      Mil gracias por tu comentario.

  5. MONICA OSORIO

    Andre!! no hay nada mejor que leer a alguien que sabe escribir y domina el tema del que escribe. Cada día me gusta mas como escribes! #MasterPiece. Loved it! Besos!!!

  6. Completely agree, although I would have thought that Javier Lumbreras would have known such points.

    Plus once you have bought the artwork, you have to give a percentage of your sales back to the auction, dealer, organisation when you then resell – figures like 25% (At least in a few big establishments in England) definitely take a big chunk out of your investment profit.

  7. daniel mendoza

    awesome blog, your apreciations totally match my reality. as an architect ,im in schock about how people are always asking me to get art for them as an investment . they are always saying: ” make sure you get us something that will multiply 5 times its current value in a few years”. im not that experienced, but i have noticed that prices themselves can depend mostly on how the art is sold. i have seen masterpieces sold in flea markets by smelly hippies for 300 u.s dollars, and then i have seen really ugly works made by overeducated wannabes , being sold at art galleries for thousands.

    (There, I said it).

  8. Juliana Diaz Baldocchi

    Fantastic article! Your arguments are solid and very convincing. I do believe that your last sentence definitely leaves the topic open for an other very interesting question to ponder about within this capitalized world; since art is not only being commodified but also financialized, this leads it to lose its critical function, as it supports a system that it should be questioning. On the other hand, the subjectivity of appreciating a work of art for what it is, is also being lost, as consumerism forces us to tend to appreciate things more if they are worth more financially.

  9. so.. my comment never got published because of lack of aproval, even tough I did not say or do anything to deserve it, but I keep receiving emails whenever someone else comments?

    wao… nice way of handling and treating your followers.

    • Hi Daniel,

      I just approved your previous comment which was sooo nice by the way. I’m so sorry I hadn’t done it before. I’ve had sooo much work at school, as you can see I haven’t even posted anything since this last article. It’s no excuse but what I mean is that please don’t take it the wrong way, I just haven’t had time to check up on the blog with everything I have going on.

      Thank you though for taking the time to read my blog and comment on it. I hope you enjoyed the article.

      Please accept my deepest apologies and I hope you’ll still log on to the site every once in a while.

  10. Alisa Mattheus

    Indeed, I say! I remember, years ago, a friend’s parents bought a piece from a promising artist thought to have great potential of increasing in value. It did not. They had spent nearly $9,000.00 on it back in the 1980’s. It was ugly and is still ugly; the artist went nowhere. Lucky for them they did not make other purchases (giggle). You recommendation to read up on the subject is seconded!

    • HI Alisa, Thank you so much for your comment. Yes, ‘contemporary’ are very tricky to predict especially when there are people behind them controlling their markets and making them rise in terms of price, incredibly fast! But everything that goes up must come down, right?

  11. It’s a pity you don’t have a donate button! I’d without a doubt donate to this excellent blog!
    I suppose for now i’ll settle for book-marking and adding your RSS feed to my Google account.

    I look forward to brand new updates and will talk
    about this site with my Facebook group. Chat soon!

    • Hi Jodie! So so so sorry for the late reply on this, I was away from my blog for a bit, unfortunately. First I will do is google this “Donate Button” thing! Sounds pretty good!! I hope you keep reading. Thank you for taking the time to comment.

  12. This is one of the biggest compliments I’ve ever gotten! Thank you, thank you. And actually, now that you mention, I’m going to consider (eventually) adding the donate button.

    Thank you for taking the time to comment!

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