First of all – Art is not made for speculation and short run profit, it is made for passion, but a smart assembled art-collection enables a huge increase of the values of an asset portfolio. Yes, collecting art is still one of the most reliable investment possibilities, like everything made for passion. The estimated profit can be over average by far and the speculation risk is less than in stock exchange or real estate, because collectors have many chances to influence the development of artists and works. Even, when we take a closer look on art-market, we will discover that, in spite of all other assumptions the art-market is very transparent. More and more private Banks and Family Offices and their advisors are getting aware of that.
Is the role of art in asset-management the role of the sleeping princess?
Still there is something mystic on collecting art, which in general makes the finance world to turn around. Romanian artist Adrian Ghenie for example developed his quotation on the market in approximately 10 years 16-fold. Works that had been 20.000 Euro a couple of years before are now on the secondary market with more than 300.000 Euro. In 2018 the US auction market increased 18 %, in U.K. 15 % according to the Global Art Report of 2019 by economist Clare McAndrew, published in March 2019 by Art Basel and UBS Bank. Even in Corona-Crisis-Year 2020, leading auction houses as Christie’s, Sotheby’s and Bonham’s are announcing increasing figures.
In the meantime investors in real estate are satisfied with doubled revenue in the same period of time. Risks that office-spaces, shops and even apartments can remain empty for a certain period or tenants who cannot pay anymore is all considered in the calculation. But in the same time they consider art-investment as risky. This preference is not based on facts, but on the experience of the most bankers. Last but not least, they have more experience in financing and failing financing of apartment with 180.000 Euro then with artworks of 180.000 Euro. Real estate market is larger, convenient and offers simple concepts, with monthly income. And if you need to unblock the investment, you can sell the apartment. What to do when you have to sell an art-collection? This is where collectors and banks with their art-advisors could jump in and control their risk by themselves.
Before we take a look on the chances collectors have to influence the development of artists, and which responsibility they have, we have to take a look on the deeper character of buying art and on its history. As always in life, if you want to understand the rules of the present, a look in the history can be helpful.
Buying art is not for everyone. Art Collectors are leaders, ready to create their business surrounding, their lifestyle and ready to create the society they are living in. Most art collectors nowadays – and now let’s look on the upper middle class who buys art until approx. 500.000 Euro, are from families who live in that tradition for many generations.
So, how does an art-collector look like? Mature, experienced, with 60 more energetic than others with 30, enjoying life, travelling, luxury, exceptional places, fine hotels, best food, good whiskey, bespoke cloths, an everlasting version of Zeno Davidoff? Sitting in heavy leather armchairs and enjoying life and celebrating art? And how we imagine a Count? Aren’t there lots of similarities?
The History of collecting art took different routes in the last 500 centuries. But they have surprising similarities. Dukes and Counts of the 15th and 16th Century, mainly influenced by the Italian Rennaissance and the ruling families as Borghese and Medici in Florence and Barbarigo and Loredan in Venice, supported artists and established huge art-collections as a symbol of status and power.
The big seafare nations of 17th Century as Netherlands and England continued this tradition, where mainly the new upper middle class as merchants and ship owners copied the lifestyle and the leadership of the nobility. The Dutch merchants of 17th Century financed the Golden Age even in arts, as they financed amongst others artists as Vermeer van Delft and Rembrandt van Rijn, who had been a ship owner and spice trader by himself. The development of enlightenment, first in England, afterwards in France, Germany, Austro-Hungary and more European regions caused that the lower nobility and the new upper middle class came closer together. And again, the upper middle class copied the lifestyle of the nobles, even when they had been “snobs”, which meant “sans noblesse”, without noble titles. The new class had maidens and drivers, silver cutleries and crystal chandeliers, valuable porcelain and finest wines and food. And they bought artworks. In the time of industrialization some of the upper middle class became nobles, and some lower nobles became entrepreneurs. The situation had been perfect for encounters and learning from each other. On that crossroad, the social levels mingled, which became a blessing for art-dealers and artists until the 20th century.
Following this theory, it might not be surprising that the main hot-spots for art in contemporary Europe are London, Paris, Netherlands, Berlin, Vienna and Venice. All this places have a history of strong determining Imperial and Royal houses or in case of Venice, a tradition of influential families. In this places we have around the former courts many lower nobles and upcoming bourgeois ready to copy a life in nobility.
This contains not only to live in luxury, this means to think and act in long term, to take responsibility for decisions, for investments, for people, for artists and the progress in their careers. “Noblesse oblige” means as well to take care of artists and to support them, as well in benefit of the own collection. Latest now we can see, that collecting art is not just a business, but a noble life-style, which requires more a certain perception of life in dignity, then money, but it enables an increase of the family fortune. It remain, collecting art is a profitable passion.
Next week in part 2 of this essay, we will take a look on the difference between investment in stock exchange, real estate and art.
Featured picture: “Clement de Jonghe – The Printseller”, etching, 1651, by Rembrandt van Rijn (1606 – 1669), Collection Thomas Emmerling
This article was published first on November 22nd, 2020 on the blog of Thomas Emmerling. The original article can be found here.