|The Bahamas Investor Magazine
June 23, 2009
June 23, 2009
As the global financial meltdown continues, some investors are exploring a variety of “safe” alternatives such as diamonds and gold that are less exposed to the vagaries of the international markets. One such alternative is art.
History shows that art collectors and sellers are some of the few that can benefit in the midst of a financial crisis.
A month after the stock market crash of October 1987, for example, Dutch post-Impressionist painter Vincent van Gogh’s Irises sold for $53.9 million. A year later, at Sotheby’s and Christie’s—two of the world’s most prominent auction houses—buyers doled out $433 million on contemporary modern and Impressionist works in seven days. In 2000, as stock valuation sank by a collective $3 trillion, the Mei/Moses Fine Art Index was up 16 per cent.
And, just two months after 9/11, auctions at Sotheby’s, Christie’s and Phillips set record prices in modern paintings, Impressionist and contemporary art for more than 30 artists, according to a Forbes 2001 report.
The trend has continued in more recent times. In 2005, Sotheby’s and Christie’s recorded sales totaling $5.8 billion. That figure jumped to $8.2 billion in 2006, when global sales of fine art reached an estimated $25 billion.
That same year, cosmetics heir Ronald Lauder paid $135 million for Adele Bloch-Bauer I, a work of Austrian symbolist painter Gustav Klimt. The work is said to be the world’s most expensive painting sold in a private sale, which skyrocketed Klimt into the same stratosphere as Spanish painter Pablo Picasso, French Impressionist artist Claude Monet and van Gogh.
In 2007, an untitled Jean-Michel Basquiat painting—purchased by New York collectors Barbara and Eugene Schwartz in 1981 for $3,150—sold at Sotheby’s for $14.6 million to benefit a museum. If that original amount had instead appreciated in step with the S&P 500, according to US News and World Reports, its value would have been about $36,000.
Last year, works by British artist Damien Hirst sold for a whopping $127 million—ironically on the same day as Lehman Brothers Holdings Inc filed for bankruptcy protection.
In February of this year, Henri Matisse’s Les Coucous, tapis bleu et rose, sold for a record €32 million (US $45.3 million), thereby smashing previous records for similar pieces. The French artist’s 1911 work was sold at the Paris auction of the collection of late clothing designer, Yves Saint Laurent.
Return on investment
Research conducted by two professors at New York University’s Stern School of Business found that fine art has “lower volatility and lower correlation with other assets, making it more attractive for portfolio diversification.”
In their paper, published in the American Economic Review, in 2002, Jiangping Mei and Michael Moses found that contrary to earlier studies, art outperforms fixed income securities as an investment.
The data compiled by Moses and Mei allowed them to track the long-term performance of fine art dating back to 1875. The Mei Moses Fine Art Price Index is based on repeat auction sales of the same works. The researchers take the original sales price and subtract it from the most recent sales price at Christie’s and Sotheby’s and calculate an annual return for a single painting.
Their research indicates that over the last 50 years, stocks represented by the S&P 500 returned 10.9 per cent annually, in comparison to the art index’s 10.5 per cent.
However, between 2001 and 2005, art bested stocks.
Painting a local picture
Experts say the key to success in art investing is to find a lesser-known artist and invest early. Artists that come from countries with a long and vibrant tradition of the arts but with little exposure on the international art scene, such as The Bahamas, may offer a bargain for even the most philistine investor.
Bahamian art is not likely to fetch anywhere near the same type of figures as those by more well-known artists but, unlike larger markets in London and New York, which are propelled by institutional purchases and public art commissions, The Bahamas market is almost solely sustained by private collectors.
“Although there has been a steady rise in the number of art galleries in recent years there are still almost no professional art dealers and critics to help quantify the art produced,” explains Heino Schmid, curator at the Central Bank Art Gallery, one of the premier exhibition spots in The Bahamas. This means the collector develops a face-to-face relationship with an artist and bargains can be found. “I would venture to say that the sale of art in The Bahamas is at a half million dollars minimum annually.”
What makes it difficult to gauge art works appreciation over time is a lack of a secondary art market, explains director of the National Art Gallery of The Bahamas, Dr Erica James. “If an artist sells a work for $1,000 for example and over the next year he shows his work, gains increasing recognition, is invited to participate in shows, is written about enthusiastically in art magazines and journals and so on, the following year a demand would be generated that allows him to sell the new work for maybe $1,500.
“But if a $1,000 painting from the year before is resold in that time for $4,000, the price for the new work can increase by $2,000 or $3,000. The market has set the bar higher,” says Dr James, who’s quick to point out that works are not acquired because of quality, but rather “the personality of the artist.”
When it comes to the swinging pendulum on the value of art, however, The Bahamas is no different from the big markets. “We’ve had solo exhibitions that have yielded $100,000 for an artist and $0 for others,”?says Schmid. “This of course is due largely to a variety of factors, mainly the accessibility of the art itself and the appeal of the artist.”
On average, he estimates that various galleries stage between 30-40 exhibitions, while there’s anywhere from 20-30 private viewings scheduled by artists for collectors on an annual basis.
The “first generation” of artists that came into prominence immediately following independence in 1973 still garner the most money for the their work, says Schmid. Stan Burnside, Amos Ferguson, Brent Malone, Antonius Roberts, Rolfe Harris, Eddie Minnis, Alton Lowe and a few others can command a five-digit sum for their art.
Sought after art
For Andrew Rogers, owner of Nassau Glass and its art gallery, Ferguson, with his “primitive”?style paintings, tends to stand out above the rest. “If you google his name you’ll see places all over the world buying and selling his paintings. He is sought after internationally more than any other Bahamian artist,” he notes. “We probably have by far the finest collection of his stuff. We’ve been buying his work for 30 years and selling it for the past 25.”
Rogers recalls that in the early 1980s Ferguson’s paintings sold for just under $1,000. Today, the same paintings are selling for approximately $6,000. Ferguson’s oil-on-canvas pieces are said to be “very rare” and sell in the region of $15,000. Rogers predicts Ferguson’s paintings are going to be much more difficult to come by and more expensive in years to come.
According to Schmid, other artists whose works are rapidly gaining in value include John Cox, John Beadle, Blue Curry, Lillian Blades, Clive Stuart, Jason Bennett and Kendall Hanna. Other artists in their early to mid-20s who are producing “exciting” work include Lavar Munroe, Omar Richardson, Bernard Petit and Jackson Petit.“But don’t buy simply because of future gains but because you ultimately love the work,” advises Dr James. “We need to remember that art retains its value because it is one of a kind and good. Collectors should read up on the market. Avoid paying for giclée reproductions that have flooded this market because they are really just high-end posters with ultimately little or no value. Use that money to invest in original work.”
Building the perfect art collection
Patron Vincent D’Aguilar leaves permanent legacy for Bahamian artists
One of The Bahamas’ leading art patrons was the late Vincent D’Aguilar, who meticulously built his collection over three decades. Before he died in February 2008, D’Aguilar amassed over 700 pieces of art, just under 500 of which were created by Bahamians.
In his will D’Aguilar stipulated that his art collection be preserved and not separated. “He wanted his art collection kept together as a historical illustration of the style and talent of Bahamian artists during the period that he was alive,”?said his son Dionisio D’Aguilar at the official launch of the D’Aguilar Art Foundation last year.
The collection includes works by the “father of Bahamian art,”?the late Brent Malone; world renowned Amos Ferguson—“the grandfather of Bahamian art” who originally made a living painting houses; Maxwell Taylor who is famed for his ceramics, paintings, and printmaking; brothers Stan and Jackson Burnside whose works portray a passion for local culture, ancestry and history, and the leading sculptor in The Bahamas, Antonius Roberts.
Earlier this year, the D’Aguilar Art Foundation opened its permanent home in Nassau making the collection accessible to art students, scholars, collectors and other visitors on an appointment basis only.
The foundation also has a Global Discovery Programme, which provides travel grants to Bahamian art students at the tertiary and postgraduate level. It also intends to loan pieces from the collection to art exhibitions and other venues.