Art, these days, is big business, especially in Hong Kong. The prices are certainly headline-grabbing – more than 25 works have now sold for more than US$100 million, and two of them, de Kooning’s Interchange and Gauguin’s When Will You Marry?, went for about US$300 million.
With consistent rises in the prices of certain types of art work, the investment opportunity seems clear. As with any alternative investment, however, it’s risky, complicated, competitive and unregulated – so it pays to ask yourself a few important questions before you start.
1. Why are you doing this?
Or, to put it another way: are you acquiring art for love or money? Because collecting is a completely different thing from investing, and it’s not a good idea to mix the two. “Of course people like the concept of collecting something they really love, whether it’s an antique car or violin or a piece of art,” says Jeremy Kasler, CEO and founder of art investment company Art Futures Group.
“Our job as a broker is to encourage people to buy art for money rather than because it’s beautiful. Don’t buy things you think will look nice on your wall; buy something that has investment potential. Personally, I look at some pieces that have fetched US$100 million and think: I wouldn’t put that on my wall.”
2. How much do you want to spend?
Naturally, the usual rules about not over-exposing yourself with a particular investment apply. But you still need to be prepared to commit some proper cash: a cheap work by an unknown artist might look very nice on your wall, but the chances of it ever appreciating in value are remote; there are a lot of artists, few of them make it big, and if their works are still cheap, you have almost no way of knowing whether they will ever do so.
“If you’re spending HK$10,000 on a painting, you might have to buy a lot of works for one of them to gain in value; to go from HK$10,000 to HK$100,000 is a huge step,” says Kasler. “Or you could go to the other end and spend HK$10 million for a work by a blue-chip artist, but then it’s already hit the highs, so the returns can be low.” His company advises people to buy in the mid-range market, between HK$100,000 and HK$1 million.
3. What sort of art do you want to collect?
The artistic movement, country of origin and media of the art you collect are of course up to you, but the market for paintings is bigger than other media, and it’s important to collect something that you can actually buy and sell easily. “You need to have access to the market you’re trading in,” says Kasler. “We’re located in Hong Kong because it’s where Chinese contemporary art is traded. If you live in Hong Kong and you’re trading in Brazilian contemporary art, it’s going to be difficult.”
4. How are you going to do your research?
Everyone is trying to sell you something, so do your due diligence. With detailed market reports on particular art markets, including different media, countries and regions, ArtTactic is an excellent resource. A number of other financial institutions, such as Citibank, also offer detailed art-investment analysis.
5. How are you going to buy it?
The two most common methods are through galleries and auctions. You can also use a professional art-buying service: a broker or intermediary, or an investment vehicle like Art Futures Group. As ever, make sure you find out all about them and, in particular, how they make their money.
Text by: Richard Lord