The art of investing

2010-11-30 13:22

IT'S hard to get a glass of wine at the Everard Read Gallery in Johannesburg's Rosebank on a Thursday night: the place is chock-a-block as shoppers, students and a few serious investors scan the walls in search of paintings not sporting a "sold" sticker.

As it turns out, investors never really left our art galleries and auction houses during the recession, says Artinsure MD Gordon Massey.

"We've seen an increase in the number of people interested in having their art insured and an increase in the values of pieces being insured," Massey says.

"The South African art scene was cushioned from the global financial crisis."

Last month saw a new record price for a South African painting, when Irma Stern's Bahora Girl sold for R27m.

Stefan Hundt of Sanlam Private Investments' art advisory service says most astute investors see the value of their acquisitions double in value over five to six years.

Clearly, it can't hurt to include art in your investment portfolio.

Art investors are assured of a safe investment, says Imre Lamprecht, art department head  at auction house Stephan Welz & Co.

"If you use the people in the know - galleries or auction houses - to advise you on your investment, you shouldn't lose money on it."
Lamprecht's advice to art investors is to buy the best you can currently afford, as not all artists create equally valuable work.

Over time, you can build up a good collection of art you can add to or sell off as the years go by.

Lamprecht also says investors should choose oil paintings whenever possible, as these hold their value over time and are of higher value than paintings on paper.

A painting or sculpture is a tangible investment, so it's crucial you like what you buy.

"You'll have to live with your investment in your house for years, so start getting to know different styles of art or artists to get to know what you like," says Lamprecht.

What to look out for

Hundt concurs, but warns potential investors need to do their homework before investing in art. "You'd get advice from a broker if you invested in equities - why not with art?"

Looking for a bargain may be the wrong mindset for investing in art, say industry experts. Investors need to be aware that one man's bargain is another man's rubbish, says Hundt.

"Look for an established artist: don't think that a master graduate's first solo exhibition is where you find bargains – the work is often overpriced and the artist may not even stay in the industry for long afterwards."

Hundt says work from an artist's second or third exhibition of significance should offer a decent return, and investors need to trawl museums to get a sense of different artists' works.

There are pockets of value in all the different styles or types of art, he says.

Even though the Sotheby's and Christie's of this world experienced dwindling sales due to their exposure to contemporary art, Hundt says investors don't have to worry whether old masters will generate a better return than their modern counterparts.

"It's about finding pockets of value in the styles you know about and enjoy."

The South African art scene has more to offer than the well-known names of Stern, Kentridge and Pierneef.

There's a greater appreciation for local art by locals, say the experts.

People are becoming more aware, especially, of the importance of works by artists from SA's political past.

So those "noble savage" sculptures tourists can't get enough of are probably not the best investment to make now. Hundt says investors are increasingly chasing a small market of blue-chip art works.

- Finweek

This article first appeared in Finweek.
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  • Tisso - 2010-12-01 09:35

    Interesting but double in value over 6 years? That's about 12%/y. Yet art ranks at least a bit riskier than smallcaps. Now do you expect 12% from a smart managed smallcap portfolio? Mr Hundt dont they put you through CFA or something at Sanlam Private?

  • Paul Neethling - 2010-12-01 13:16

    Very informative article for investing in South African art. Thanks

  • Kobus - 2010-12-02 13:54

    @Tisso Correct, and that is not even taking the cost for the "Artinsure" of Mr. Gordon Massey into account. Also to sell those small caps of yours will propably cost you R30 in brokerage, but selling the art will cost a bit more. Investment in are is not necessarily bad (lots of people have made big money) but certainly not always good. More people wont double their money in 6 years than those who would',

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