The Price and Value of Contemporary Art – artmarketblog.com

The Price and Value of Contemporary Art – artmarketblog.com

contemporary-art-auction-2The problem with the market for contemporary art is that the perceived value of the work by a contemporary artist (especially emerging artists) is often reliant on someone taking the risk of backing that artist which then adds credibility to their work thus prompting other people to buy their work as well.  With the work of contemporary artists (even more so with emerging artists), the price of their work and the value of their work are often virtually one in the same because it is likely that there will be little or no other factors with which to determine the value of their work.  The reason that I refer to the value of work by emerging contemporary artists as perceived value is because it is a value based on the opinion of who ever is purchasing the work. It is unlikely that an emerging artist’s career or their body of work would have had time to develop or progress enough for someone to make a justifiable judgment regarding the value of the work based on the characteristics that are most often used as indicators of value. These indicators include: provenance, contribution to art history, rarity, exhibition history of artist, critical analysis, significance of particular work in artist’s oeuvre, recognition by scholars and academics etc.

In a nutshell, the contemporary art market is driven by people’s perception of value which is, in turn, based on other people’s perception of value which is basically what people refer to as the domino effect. One person gets the ball rolling and others keep it going. This trend is evident with the likes of Charles Saatchi who can make or break an artist because of the influence that he has on people’s perception of an artist’s work. Saatchi’s influence is so great that people mimic his actions regardless of their own point of view and regardless of what Saatchi’s motives for purchasing that artist’s work may have been. By the very act of purchasing an artwork Charles Saatchi or anyone with a similar level of influence can, by purchasing a work of art, give value to that work of art and the artist that painted it. Because there is no real set of factors that dictate what determines the value of a work of contemporary art by an artist whose career is still in the developing stages we often have rely on the opinion of experts such as art critics, gallery owners, museums, collectors, dealers etc. to provide an opinion of the value of the work of a contemporary artist. An opinion which, in the case of gallery owners and dealers, is quite likely going to be at least somewhat biased and subjective.

During boom times the prices being paid for works by many of the contemporary artists rise at a far faster rate than they should and for reasons that are not related to the actual value of the artist and their work. It is usually the speculators and flippers who push the prices for the contemporary works of art sky high as they try and make a quick buck. However, when the potential for making a quick buck disappears and the art market takes a hit, these flippers and speculators are the first to exit the art market. Because the value associated with a work of contemporary art is a type of value that is dependent upon people’s actions and is not an inherent value that is automatically associated with that work of art, if people stop buying the work work of such an artist then there are no, or very few other factors that give value to the work of art. With the one major source of perceived value no longer in play people then start looking at the traditional defining factors of value such as the ones I mentioned earlier (provenance, contribution to art history, rarity, exhibition history of artist, critical analysis, significance of particular work in artist’s oeuvre, recognition by scholars and academics etc.). Because the traditional defining factors of value become much more identifiable and qualifiable the longer the artist has been working and the longer the artist’s work has been in existence, the work of the old masters becomes far more attractive.

People turn to the old masters and works by more established “blue chip” artists during times of art market uncertainty because the value of works by such artists is much easier to identify and because the value of such works is actually associated with the characteristics of the artist’s career and their body of work and not just based on perception. Because the value of works by “blue chip” artists such as the old masters is much easier to determine, works by these artists are far less prone to the rapid rise and over-inflation of prices like contemporary works are and, as such, represent a far more stable and less risky investment. For this reason it is quite likely that there will be a renewed interest in works by the modern and old masters and a reduced level of interest in works by contemporary artists and an even lower level of interest in works by emerging contemporary artists.

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

Trailblazers at Boutwell Draper Gallery – artmarketblog.com

Trailblazers at Boutwell Draper Gallery – artmarketblog.com

jesse-hogan

Work by Jesse Hogan

From the 19th of November to the 13 of December, Sydney’s Boutwell Draper gallery are holding an exciting exhibition called Trailblazers which includes work by artists from Australia, Europe and the United States who are considered to be at the cutting edge of contemporary artistic practice.
According to the exhibition catalogue “Content is what unifies the artists in Trailblazers, a show of
international contemporary artists at Boutwell Draper Gallery.The contributing artists, though in various stages of their art practices, produce the kind of content that has plucked them from their respective beginnings in new urban, underground, street and outsider art and landed them in professional art circles around the world. These are the talents that have marched forward and defined new paths for the future generations”
The artists included in the show are:
Kelsey Brookes, Copyright, Ben Frost, Matt Furie, Jesse Hogan, Hush, Ian Johnson, Anthony Lister
Buff Monster, Numskull, 1337, Alex Pardee, Shannon Dmote Peel, Cleon Peterson
Mark Whalen Kill Pixie, Plusminus, Pure Evil, J.Shea, Regan HaHa Tamanui, Andy Uprock
Trent Whitehead, Kid Zoom
Established in 2001, Boutwell Draper Gallery is committed to the promotion of both emerging and established contemporary artists. The artists shown in the gallery work in a broad range of media, from painting and photography to sculpture, installation, video and digital arts. For more information go to http://www.boutwelldrapergallery.com.au or see the catalogue here:trailblazers

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

Contemporary Korean Art [Oct 08] – artmarketblog.com

Contemporary Korean Art – artmarketblog.com

Copyright@Artprice.com

On the one hand, Korean art is being driven by changes within the country that started 20 years ago with the Olympic Games in Seoul and the first fully democratic elections, and on the other hand, by the remarkable success of contemporary Chinese and Indian artists.
While Asian auction houses, such as Borobudur Singapore and Seoul Auction Center, are driving the market there, the global majors, Christie’s and Sotheby’s, recently integrated Korean art into their Contemporary Asian Art sales. Korea also has its own art fair, the KIAF, whose seventh edition ended in September.

Surrounded by other Asian art fairs of the likes of Art Taipei, SH Contemporary, Art Beijing, Art Singapore, Shanghai Art Fair, CIGE in China, Art Beijing and Art Fair Tokyo, Korea has taken advantage of the economic and artistic dynamism of the entire Asia zone.
In the West, Korean artists who have emerged in the auction world and who are promoted in major exhibitions are very often naturalised Americans, like Kim SOO-JA and Do-Ho SUH who have followed the path opened by NAM JUNE PAIK, a South Korean born in Seoul in 1932 and who died in Miami on 29 January 2006. Nam June Paik was a veritable precursor in the domain of art video and a world recognised artist. The year after his death, the market for his work literally exploded generating a total auction revenue of 2.24 million euros – a sum representing his cumulative auction revenue over the 10 previous years! The Christie’s sales in Hong-Kong in May and November 2007substantially contributed to this result, particularly with the video installation entitled Wright Brothers which set a new record for the artist when sold for double its initial estimate at HKD 4.2 million (USD 540,120). In a gloomy economic period, the two installations presented at Sotheby’s London on the 20th October 2008, and at Christie’s on the next day, remained unsold.

In 2007, while Christie’s was generating million-dollar sales from its Asian Art sales in Hong-Kong with works by Xiaogang ZHANG (Portrait in Yellow, 25 Nov. 2007) and Minjun YUE (Portrait of the Artist and his Friend, 27 May 2007), Korean artists also largely exceeded their estimates at the same sales. Among them, KIM DUCK YONG, CHOI YEONG GEOL, YOON BYUNG ROCK, KIM EUN JIN and several artists in their thirties like AHN SUNG HA, JEONG BO YOUNG, MIN JUNG YEON or PARK JAE-YOUNG. The hyper-realist painting by Jae-Young PARK for example, estimated at HKD 80,000, fetched HKD 100,000 more its estimate (selling for the equivalent of USD 23,000) on 27 May 2007.

Today, young Korean artists born in the 1960s generate results on a par with their Asian peers. Take for example Dong-Yoo KIM, born in 1965, whose work Mao vs Monroe fetched a new record at Sotheby’s London in February 2008. The work, representing the face of Mao Zedong based on an accumulation of hundreds of mini-portraits of Marilyn Monroe, like the pixels of the image, is an extremely buoyant theme in the speculative climate of Chinese art. It fetched no less than GBP290,000, (USD 576,520) … far beyond the record of his elder Kwang-Young CHUN (born in 1944) whose auction high was HKD 2.5 millions (USD 321,500, 25 Nov. 2007, at Christie’s). Both appeared for the first time at public auction the same year (2006). They share – like many other Korean artists – a penchant for the extremely minute, for accumulation and for illusionism. With CHUN KWANG YOUNG, this penchant is expressed in a series entitled Aggregation, inaugurated in 1994. Each work is a surreal landscape composed of an accumulation of hundreds of minuscule triangles made out of Korean mulberry paper… the same paper that his herb doctor used to envelop his herbs and remedies. These works were acquired by buyers from Korea, Japan, China and the United States. On 17 September 2008, at the Sotheby’s’ Contemporary Asian Art sale in New-York, an impressive Aggregation (131.8 x 163.2 cm) doubled its estimate when it fetched USD 85,000. Two years earlier, when Sotheby’s offered a work of similar quality by CHUN KWANG YOUNG for the first time, it was priced at USD 40,000.

Another very successful Korean artist is Do-ho suh. Born in 1962 in Korea, he lives in New-York where his first sculpture submitted to auction by Christie’s in 2007 fetched USD 50,000, twice its estimated value… Entitled Some-One, it is made up of hundreds of soldiers’ I-D plates. The work of Do-ho suh already caused a sensation 6 years earlier at the 49th Venice biennial in 2001 where it represented South Korea.

As the Art market is starting to feel the first effects of the financial crisis, and considering that 30% of the lots remained unsold at Sotheby’s Hong Kong at the beginning of October, in Asia the Artprice AMCI, is getting down and down (reaching -10 on the 27th October). As a consequence The Korean artists rise may slow down within the next few months.

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

German Expressionism: aggression with a brush – artmarketblog.com

German Expressionism: aggression with a brush – artmarketblog.com

Copyright@Artprice.com

The price index for German expressionist masters has been particularly dynamic over the past 2 years. Underpinning this price progression: a rarefaction of the offer; some exceptional works coming to market and plenty of recent exhibitions. For example, Emil Nolde is currently being honoured with a retrospective at the Grand Palais in Paris – until 19 January 2009.

Over the last two years, the auction results of Emil Hansen NOLDE (1867-1956) have been spectacular. Already in 2002 he emerged as the top-ranking German artist (by sales volume) with an annual revenue figure of 4.6 million euros. In 2006, sales of his works generated no less than 20 millions euros! This year, there have been numerous sales above the million-dollar line in Germany, Switzerland and the UK. A heavily framed portrait from 1919 intituled Rotblondes Mädchen, from which emerges a piecing melancholic look, generated a new auction record for the artist when it sold for GBP 1.85 million (EUR 2.7m) on 20 June 2006 at Christie’s in London. This strange face, disturbing and captivating at the same time, reflects a particular side of the work of Nolde who examined the portrait and became fascinated by the duality of masks. On the same day of the sale (dedicated to German and Austrian art) Christie’s generated a record for one of his seascapes (1909): an explosion of colour at the frontier with abstraction entitled Sonnenuntergang which sold for GBP 1.7 million (nearly EUR 2.5 million).
Five months after the Nolde record, Ernst Ludwig KIRCHNER‘s caused an auction sensation: his painting Berliner Strassenszene/Bäume was a leader lot of the Christie’s New York sale on 8 November 2006. An entire 12-page dossier was devoted to the work in the sales catalogue. It was even compared with Picasso’s famous Demoiselles D’Avignon painted five years before Kirchner’s Berlin street scene. The final result measured up handsomely to the expectations of the auctioneer: 34 million dollars for this museum piece, 10 million above its high estimate. That year (2006), Kirchner’s works generated an outstanding total revenue figure of EUR 42.29 million! Fuelled by the exceptional 2006 results, the good health of his price index has continued through 2007 and 2008.

In 2007, the strongest sales revenue figure was generated by Alexej JAWLENSKY von (1864-1941): 12 sales above the million-dollar line and a total revenue of EUR 29.2 million over the year, i.e. 20 million more than in 2005. And 2005 was already a very good year for the artist’s price index. In fact, Sotheby’s generated his record in New York with a flamboyant portrait of Schokko (painted around 1910) that had remained in private hands since its acquisition at the end of the 1960s. The piece fetched USD 7.4 million. But when the new owner saw the spectacular results that Jawlensky’s work was fetching in 2007, he sent the painting back to auction on 5 February 2008 in London where it sold for 9 million dollars more than at the previous transaction (Sotheby’s GBP 8.4 million, or USD 16.5 million).

The London sales of February and June 2008 were both positive for each of the members of the Die Brücke including Kirchner and Nolde, but also for other expressionists like Hermann Max PECHSTEIN, Karl SCHMIDT-ROTTLUFF, Otto MUELLER and Erich HECKEL. In June 2008, Pechstein tripled his low estimate for a circus scene with zebras and camels that sold for the record price of GBP 1.7 million at Sotheby’s (Zirkus mit Dromedaren, USD 3.35 million).

These million-dollar masterpieces are rare however and their buyers are very demanding. Each year, dozens of works are bought in because they do not exude the expressionist spirit. This was the case, for example, of an Otto DIX landscape that was offered for GBP 50,000 at Christie’ in June of this year. The overly ‘classic’ subject matter did not interest anyone… But if you offer buyers a charcoal drawing by the same artists from the same period representing a succubus with hideous features, then the biding will go substantially beyond this kind of price range. The demonic Sitzender Weiblicher Rückenakt that was offered at the Villa Grisebach in May 2008 fetched 180,000 euros although estimated at 50 to 70 thousand euros.

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

Art as Alternative Investment – artmarketblog.com

Art as Alternative Investment – artmarketblog.com

The interest in alternative investments which are those investments that are not one of the traditional investments such as bonds, stocks, cash, money markets etc. has been on the increase in recent years as people seek safer and more stable alternatives to the highly volatile stock market and money markets. Alternative investments such as art attract even more interest in times like these when the traditional investment routes take a battering and begin to look rather unappealing. The Australian Triple J radio station aired a half hour show on alternative investments today which featured some information and advice on investing in art which was provided by myself. If you would like to listen to the show and hear my advice on collecting and investing in art then visit one of the links below which will open the program in the specified formats (section on art investment is near the end of the program).

Hack Half Hour – Alternative Investments

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

Gerhard Richter Buy Alert – artmarketblog.com

Gerhard Richter Buy Alert – artmarketblog.com

Ever fancied owning an original artwork by Gerhard Richter?? With Richter being one of the most important post war artists and one of the most expensive living artists it is hard to think of a reason that anyone wouldn’t want one of his works in their collection. If you are thinking that you could never afford an original work by Richter then think again because to celebrate his first solo show in sixteen years which is taking place at the Serpentine Gallery in London, Richter has produced eighty exclusive original works that are being sold thorough the Serpentine Gallery. Each of the eighty works is tltled Quattro Colori and according to the Serpentine gallery website “comprises four coloured squares, drawn from the same palette of 25 colours used in Richter’s 4900 Colours: Version II, the subject of his exhibition at the Serpentine. Like 4900 Colours: Version II, the colours for Quattro Colori have been selected at random, rendering each piece unique.”

Quattro Colori 2008
Enamel Paint on Aludibond and Wood
19.4 x 19.4 cm
Signed and numbered 1 to 80
Each one unique

Price: £12,000 (incl. VAT)

The last couple of years have seen the value of Richter’s work skyrocket as can be seen in the graph to the right which shows a major increase in value since 2007. The auction record for Richter stands at US$15,483,589 for the work Kerze (Candle) which was sold by Sotheby’s at their Contemporary sale on the 27th of February 2008. On the 12th November, Christie’s will auction a major painting by Richter titled Abstraktes Bild (710) in their Post-War and Contemporary Art Evening Sale. According to a press release from Christie’s: “On the heels of a world record price established for Gerhard Richter last season, Christie’s will offer a masterpiece of abstraction by Richter, Abstraktes Bild (710), 1989, (estimate on request).”

At 76 years of age Richter is unlikely to be able to continue producing art for too many more years which is bound to be a factor in the recent increase in the value of his work. Another factor that is likely to have contributed to the increased desirability of Richter’s work is the increased recognition and exposure that Richter has experienced in recent years outside of Europe.

Given the likely unprecedented interest in this Edition, the works which have been reserved for the general public will be available for purchase only in the lobby of the Gallery, in person, on a first-come-first-served basis from 10am on Tuesday 23 September 2008.

For more information, please contact Deborah Bullen, Print Manager, on + 44 (0)20 7298 1511 or for more information go here:
http://www.serpentinegallery.org/2008/07/gerhard_richterquattro_colori.html

image 1:
Quattro Colori 2008
Enamel Paint on Aludibond and Wood
19.4 x 19.4 cm
Signed and numbered 1 to 80
Each one unique

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

2008 Art Auction Records – artmarketblog.com

2008 Art Auction Records – artmarketblog.com

The art world gurus at artnet.com have compiled a list of new art records set between the 1st of January 2008 and the 30th of June 2008 and ranked according to sale price all the way down to $100,000. According to artnet “Overall, the sprawling list of almost 1,000 new records dramatically reflects the triumphant globalization of the art market. The fall of communism was the best thing that ever happened to the art business, opening up huge new markets of millionaire art collectors. The ranking is filled with “new” names from Canada, China, India, Iran, Pakistan, Russia; sales devoted to Scottish art, Irish art, Scandinavian art and Greek art all had individual works being bought for more than $1 million. The booms in 19th-century American and Victorian art continue, as does the rapid growth of auctions held in Asia and the Mideast. The rise in value also delves into the second and third tiers of familiar art movements, and extends backwards in time as well, including early modernists and 19th-century pioneers.”

To take a look at the top 156 names check out this link which provides the details in a pdf format:
http://www.artnet.com/magazineus/news/artmarketwatch/new_art_records_2008.pdf

Thanks artnet !!!

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

New Oz Art Resale Royalty Scheme – artmarketblog.com

New Oz Art Resale Royalty Scheme – artmarketblog.com

The details of the Australian resale royalty scheme for visual artists were announced by the Australian government yesterday which are due to take effect from July 1 2009 if the bill is passed when introduced to the parliament. The defining and most controversial characteristic of the proposed scheme is that the royalty will only be payable on the sale of works of art sold through the secondary market where the seller has acquired the artwork after the legislation takes effect (anticipated to be July 1 2009). What this means is that if someone wants to sell an original work of art after July 1 2009 and acquired the work prior to July 2009 a resale royalty will not be payable. The sale of the work by the person who purchased the work from this person will, however, attract a resale royalty as it was acquired by this person after July 1 2009 . Basically, once the legislation takes effect any work sold on the secondary market after July 2009 that was acquired by the seller after July 1 2009 will require the liable party (will be joint and several liability) to pay the royalty. Any work sold on the secondary market after July 1 2009 that was acquired by the seller prior to July 1 2009 will not require the payment of the resale royalty.

For practicing artists this means that they will have to wait for the work to be sold on the secondary market for the first time to receive a royalty for works that they created after the legislation takes effect and will have to wait for the second sale of the work on the secondary market to receive a royalty for works that they produced and sold prior to the legislation taking effect. For deceased artists whose work is still in copyright, the heir of the deceased would receive a royalty on works sold by a seller on the secondary market who acquired the work after the legislation takes effect. The heir would, however, have to wait to receive a royalty for works sold on the secondary market that were acquired prior to the legislation taking effect until the work is sold by the person who purchased the work from the person selling that work who acquired the work prior to the legislation taking effect.

If you think that this scheme sounds overly complicated and difficult to administer then you would be right. According to Michael Keighery who is the Chairman of the board of Viscopy, a visual arts copyright agency based in Sydney said “It is going to be very difficult to track and verify whether the work has been resold before or not” (Sydney Morning Herald article by Louise Schwartzoff October 4 2008). Keighery’s concerns are extremely valid because the number of people who keep records of the date that they purchased a work of art will be limited and even those who do have proof of the date of purchase could potentially give false details regarding the date to avoid paying the royalty.

To be continued…

For further information on the new Australian visual arts resale royalty scheme visit http://www.arts.gov.au/artists/resale_royalty

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

Sothebys Transparency Scandal – artmarketblog.com

Sotheby’s Transparency Scandal – artmarketblog.com

Sotheby’s is currently embroiled in a scandal involving several paintings sold at auction to CNET founder Hasley Minor who is refusing to pay for the works because Sotheby’s allegedly failed to disclose the fact that they had a direct economic interest in the works purchased by Minor. Last month Sotheby’s sued Minor for not paying for the works who has subsequently sued Sotheby’s for failing to disclose their financial interest in the work. The problem with an auction house having a financial interest in a work of art is that it could be argued that the auction house will focus more resources and energy on the promotion of that work to ensure that they receive the best possible financial outcome for themselves. This would mean that the buyer will most likely pay more for the work because of the auction house’s financial interest in the work.

More details on the case can be viewed here:
http://online.wsj.com/article/SB122299197441600575.html?mod=googlenews_wsj

Similar issues relating to the transparency of auction house dealings have been making headlines here in Australia where a group of auction houses recently lodged a formal complaint to the Australian Competition and Consumer Commission relating to the failure by another auction house to disclose details of the financial interest that they had in several paintings that the sold. For further details see this post:

http://artmarketblog.com/2008/07/31/oz-art-auction-meltdown/

My question to you is should auction houses be required to identify works they are selling that they have a financial interest in and do you believe that an auction house could cause an increase in the selling price of a work they have a financial interest in by focusing more on the promotion and sale of that work?

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

Art Auction for Barack Obama – artmarketblog.com

Art Auction for Barack Obama – artmarketblog.com

A group of artists who wanted to provide some financial support for the Barack Obama presidential campaign have got together and organised an auction of donated artworks the proceeds of which will be donated to Obama campaign. According to the website for the auction (www.artforobama.net) “ART FOR OBAMA is an online auction of photographs to benefit the Obama Campaign. Fifty of the country’s most prominent artists and photographers have donated their work for this cause. All proceeds will be donated in strict accordance with the regulations of the Democratic National Committee and the Federal Election Commission.”

Artists such as Uta Barth, Tim Davis, Larry Fink, Todd Hido, Alex Soth, Larry Sultan, Richard Misrach, An-My Le and Nina Berman have all donated works to the auction which will begin on Friday OCTOBER 3 AT 5:00 PM EST! here: http://www.cmarket.com/auction/AuctionHome.action?vhost=artforobama
Most of the works in the auction are photographic works which is great because it means high quality at affordable prices.

I think that this auction is a fantastic idea and a great way of supporting a worthy cause that could just net you a great bargain!!

image:
Alec Soth
Advantage Inn, from the series Niagara, 8″x10″ C-Print on 11″x14″ paper
Photo taken 2005, Printed 2007
Artist’s Proof 1/5
Value: $1,200.00
Starting Bid: $700.00

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

Australian Art Investment Fund – artmarketblog.com

Australian Art Investment Fund – artmarketblog.com

The growing popularity of art as an investment has resulted in the creation of a number of new art investment funds one of which is The Art Trust (http://www.thearttrust.com.au), an Australian based art investment fund. For those of you new to the concept, an art investment fund gives people the opportunity to invest a certain amount of money (by purchasing units), along with a group of other investors, in a professionally managed portfolio of art. I recently interviewed the Director of The Art Trust, David Baker, to get his views on art investment and more info on The Art Trust.

David refers to the Product Disclosure Statement (PDS) of The Art Trust several times in the interview which can be viewed here:
http://www.huntleygroup.com.au/documents/FINALPDSApr08_000.pdf

Interview with David Baker, Director of The Art Trust:

Q. What does The Art Trust offer prospective investors?

A. -An investment in The Art Trust is an in the “Alternative Asset” category, enabling diversification within an investment portfolio in the current volatile property and share markets.

-Expected strong long term capital gain.

Q. What is the structure of the fund?

A. A Managed Investment Scheme with independent Responsible Entity (See page 10 of PDS)

Q. Why should people invest in an art fund such as The Art Trust as opposed to purchasing an artwork outright?

A. – Risk minimised with diversified portfolio of works.

– The strong Art Investment Committee (AIC) members are independent of the commercial art world.

– With the curatorial staff, the AIC will help TAT to target “quality “works of an artist. (As we know, some of our best known artists have gone through periods of producing lesser quality works [especially as they got older]).

– The ability to buy works from the Trust with no commissions payable

– The ability to rent from the Trust (subject to strict conditions)

– Regular showings of Trust works, and talks from artists and AIC members

Q. In your opinion, what are the strengths of the Australian art market from an investment point of view?

A. -Underlying broad current (and continually increasing bradening) investment base.

-Historically provides an alternative to equities and property.

See page 14 of PDS for more information

Q. Who will decide what artworks the trust will invest in and what expertise do they have in this area?

A. There exists a stringent acquisition process (including provenance confirmation). Suitable works will be actively sought, or reactively assessed, by the curatorial staff. Final approval for purchase will be the responsibility of the Manager and RE based on the written advice of the AIC.

See details of AIC on Page 13 of the PDS

Q. What does the trust perceive as the benefits of focusing on Australian art?

A. -The TAT was created specifically for investing in Australian art, and the depth of knowledge within the curatorial staff and AIC are Australian focussed.

-Investing in foreign works creates a whole new range of risks, not least of which are the depth of knowledge required to assess whether the work is “quality”, and potential exchange risk problems.

Q. How does The Art Trust plan on generating a return for investors?

A. In simple statements income is derived from:

– Buying well and achieving capital gain on the acquisition over the life of the fund.

– Building on the existing rental business (and thereby income) which has about 450 works rented out at 15-20% pa of their market value

Q. What are the objectives of The Art Trust?

A. The objectives are predominantly based on the plan above, but See page 5 of the PDS for a more formal statement.

Q. What is the minimum investment amount?

A. $25,000. See page 5 of the PDS for more information (including the instalments)

Q. What is your background?

A. See pages 12 and 13 for details of directors and AIC members. Also attached details of our Chairman.

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

Danger of Careless Art Market Talk – artmarketblog.com

Danger of Careless Art Market Talk – artmarketblog.com

A Sotheby’s auction here in Australia on the 26th of August did not go as well as was anticipated with just less than half of the works selling and a final sales figure of AUD$5.77 million without buyers premium against an estimate of $9-$12 million. According to an article in the Australian newspaper, Georgina Pemberton, Sotheby’s head of paintings, described last night’s result as “a reflection of our economic climate and we are now going through a correction in the art market” After making this comment to the Australian newspaper, Georgina then went on to make the following comment regarding the auction to Bloomberg news “Some of the collectors are becoming more conservative, but overall the art market is still very strong”. Hmmm, seems like someone doesn’t know whether they are coming or going.

Other than the fact that these two statements contradict themselves, stating that the market is currently experiencing a correction that is seemingly based on this one sale is rather silly. A market correction is generally understood to mean a drop of between 10% and 20% in a financial market over a short period of time which would require a general market downward trend. Taking into consideration that there has been very little indication that the market is losing strength other than the Sotheby’s auction and that there are no figures relating to the definition of a market correction to back this statement up, to state that the market is experiencing a correction is very premature and at this point, incorrect.

Further evidence that the market is not in a correction came from an auction that took place the next evening by Bonhams and Goodman which experienced a far different result to Sothebys. According to the Bonhams and Goodman website “Record numbers had inspected the paintings at viewings in Sydney and Melbourne, with over 1500 people attending the auction venues, 30% up on the numbers for April. On auction night 250 people packed the Prahran saleroom to see Masterpieces of Australian Art from The Julian & Miriam Sterling Collection sell for $1,976,000 (including buyer’s premium), well over the lower estimate published in the catalogue. The sale of the Australian Fine Art catalogue contributed another $3 million to the result. ” Geoffrey Smith, Director & National Head of Art at Bonhams and Goodman went on to comment that “It was our most successful sale ever.” In total $4.9 million of art was sold against a lower estimate of $3.6 million although interestingly, only 49% of works sold which was the same percentage of works that sold at the Sotheby’s auction. What these results do show is that people are paying more money for the best works and that, although the sale rates may give the appearance of a correction, an proper analysis of the whole market points to more of a market transformation (ie. a change in buying trends and habits as opposed to a down-turn)

Another telling indication that the problem may be with Sotheby’s and not the market is the fact that only around 150 reportedly turned up at the Sotheby’s auction compared with 250 at the Bonhams and Goodman auction. With several more important art auction scheduled in Australia over the coming weeks it will be interesting to see what the results will be.

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications