Investing in art can be daunting.
First, you need to actually find works that are worth investment, which can feel next to impossible if you lack knowledge and experience of the market, or access to galleries, auctions and higher-end art fairs. Then there’s the expense (whether real or imagined), often fueled by the practice of some sellers of not openly listing their prices. And, finally, there’s the question of what exactly to do with your investment once you’ve made it.
I think these concerns — I’ll sum them up as access, cost and longevity — are heightened for millennials (you know who you are). Not only are we still relatively new to any kind of investment, given where we are in our financial careers, we’re also faced with an ever-growing list of competing ways to invest our money.
The truth though is that some recent market developments have made it easier than ever to invest in art.
1. ACCESS: You can find great art online (with a little bit of help)
Increasingly, you don’t need industry contacts or access to ‘bricks and mortar’ galleries, fairs or auction houses to find art for investment. After a bit of a slow uptake, the art market is now well on its way to embracing the world of online and its benefits of greater depth, scope and streamlined communication between sellers and buyers.
Sites like Artsy and Saatchi Online have extensive, searchable libraries as well as automated tools to help you pinpoint works based on existing preferences (the Art Genome Project and Art Advisory Survey, respectively). Artists are also growing their own social media and e-commerce presence, and so offering new channels for direct engagement and sales.
A question remains though of what exactly to buy as an investment; alongside greater access comes widening choice and competition for your time, efforts and money (and remember we millennials helped to put ‘FOMO’ in the dictionary). You might have a clear idea of what you like on an aesthetic or conceptual level but this won’t necessarily align with market trends.
The solution offered up by the Art Market 2.0 (so to speak) is to incorporate expert guidance about art into the investment process itself; choices are outsourced to those in the know. Art funds such as Arthena offer shares in combined funds of works at different levels of risk (e.g. ‘blue chip’ vs. ‘established masters’), effectively removing the need to decide about specific artworks. Feral Horses also does the hard work upfront— sourcing emerging artists — but then offers additional choice by allowing investors to select shares in individual works.
2. COST: art doesn’t have to be expensive
We seem to hear about record-breaking sales at auction every other month, and I wouldn’t blame anyone focusing on such headlines for concluding that art investment is beyond their means.
‘Blue chip’ artists (the Picassos, Warhols, Rothkos, and so on) are of course always wildly expensive, but it’s important to note that these sales relate to artworks as a whole. If one’s goal is to own something outright, affordability usually comes hand-in-hand with a reduction in market status and future sales potential. The Affordable Art Fair is a good place for this approach; works range from the hundreds to low thousands of pounds.
However, a whole new world of opportunity opens up when considering the option to buy shares in an artwork; suddenly, financial access is granted to works that might otherwise fall outside of one’s price range. Minimum buy-in depends on the given platform, status of the artist and work and number of available shares, but can be surprisingly low (for example, a share in one of Feral Horses’ works can start from less than £10).
3. LONGEVITY: art equals options
So, cost-effective approaches to investing in art are definitely out there. Whichever route is taken, an immediate follow-up is to ask what to do next, or in other words: how long do I hold onto my assets?
It’s worth bearing in mind a few general principles when it comes to answering this question. First, the art market has historically held a low correlation with global stock markets and traditional asset classes, and can therefore represent an effective means of diversification in any portfolio. Second, art is a tangible asset. By this I mean that whatever might happen to a work’s value at market, the work itself — and its prestige and historical value — isn’t going anywhere. This gives more options in future.
Third, a big part of investing in art is the opportunity to become part of a community; not only as an investor but as a supporter of an artist, gallery or even a cause behind the work (see ‘impact investing’). Once you’re in, you’ll likely find that your interest in the market grows: keeping up with the artist’s output, attending events organised by the seller or gallery, and so on. This engagement will in turn help you to become a better investor, even after you sell your original assets on.
Finally, owning shares in a work of art gives options to ‘exit’ what is normally an illiquid asset: notably, trading these shares in a secondary market. As well as providing a secondary market within its own platform, Feral Horses offers what amounts to a short-term dividend by renting out artworks and distributing the earnings according to the number of shares held.
As with any investment, you’ll need to do your homework — and accept the inherent risks — before jumping in. Hopefully, the above points though have shown that investing in art is not quite as daunting as it first appears.
Written by Thomas Stimson