Navigating the peaks and troughs of a mystifying market

As featured in the Deloitte Luxembourg and ArtTactic Art & Finance Report 2017.

Entering an art fair for the first time is a disorientating experience. Everything you see is vying for your attention, imagination, and inevitably, money. The daunting task of the new buyer is to negotiate this maelstrom, often with only the faintest inkling that perhaps what is on display is not necessarily all that is on offer, not knowing that seeming bargains are not necessarily sound investments nor that there can often be a discrepancy between the monetary and artistic value of an artwork.

A new buyer at his or her very first art fair may stop at a certain booth and behold a brightly colored abstract canvas. This work has caught his or her eye for the simple reason that he or she “likes it,” without any reference to the artist’s background or artistic context. From an outsider’s perspective, it may seem that there is neither harm nor foul in purchasing said work to satisfy one’s aesthetic impulse, just as one might purchase any other decorative item to adorn one’s household. The knowledge required to know whether this canvas, so coveted by the new buyer, has long-term market and artistic value beyond its decorative qualities may not be of any interest to the buyer. As with novices in any new industry, budding collectors are endowed with beginners’ luck that may enable  them  to  maintain  objectivity  and lead them to become a trailblazer of taste and fosterer of new talent. Unfortunately, more often than not, this innocence is likely to make them vulnerable. Even extremely experienced   buyers   have   suffered   from the pitfalls of a bad deal and a changeable market.  Many  collectors  have  been  taken in by a work in bad condition, or with a questionable provenance or—worse still— trusted  implicitly  in  the  hype  surrounding the latest artist at the vanguard of contemporary style.

It is undeniable that art has set itself apart as an asset class from other investment opportunities. The market, though subject to downturns, is a stable, durable and long- lasting alternative to investing in property, gold, or stocks. This, inevitably, brings a certain type of buyer to the market—one whose interest is purely financial—and this buyer will require different advice from the high-end collector whose investment in art is both for pleasure and to turn a profit. There is, therefore, above and beyond the competition between dealers, galleries, and auction houses to sell their works, a drive to find the best advice money can buy to secure the most lucrative investment or  the most distinguished collection.

However, regardless of the new buyer’s approach to purchasing artwork, the best advice will always remain the same and is perhaps the direct opposite of what one might suppose. The best advice to give a new buyer is, in fact, not to buy but instead to look, to cultivate the perfect eyes, nose, and ears for appreciating artworks and the art market. Investors and collectors must be patient and begin by looking, taking note of what is on offer, and where and when certain artists make the biggest impact. They should become familiar with the names and styles around them and when they feel satisfied with their knowledge of movement, taste, art history, gallery history, and primary and secondary markets, they should go back and look again. It is essential to foster an obsessive drive for research when sourcing and acquiring a desired piece.

There is no great secret to success in the art world; if anything, the greatest pitfall is that people are often so busy looking for a nonexistent catch they end up ignoring the obvious factors that are constant obstacles to making a worthwhile purchase. These obvious factors are what any good adviser would thoroughly assess as part of the due diligence process. Provenance, exhibition history, price compared to comparable works and the rarity of the piece within the artist’s oeuvre are just a fraction of the type of precise questions that must all be thoroughly resolved before a purchase can be completed. The longer one looks, the more knowledge one accumulates, and the easier it becomes to answer these obvious but indispensable questions.

However simple this process may seem, new buyers tend to be impatient, wanting to act on their own ideas and harbour suspicions about hiring an adviser. Investors who have found success in alternate asset classes may fancy themselves capable of navigating the art market without the need for such a slow and calculated approach. While there is an element of speed that must be observed, buying from up-and-coming artists while you can still afford them is the cornerstone of starting any good art collection and time spent fostering relationships with people in the artworld is key. This is perhaps the greatest and most long-term investment you can make, honing one’s senses to appreciate the art market is always best done collaboratively with an art adviser whose connections, experience, and expertise are the most valuable assets on the market.

If new buyers follow these steps—time and patience, advice and due diligence—their chances of success are manifold, likely not only to produce high-end results, but also to nurture a passion for art that truly enrichens their lives.

 

Article by Rebecca Jennings

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