Forget about shares: The art market beats the Wall Street indices
One of the hardest years in global economy turned out to be a record year for art sales, catapulting the world of color into a vibrant financial arena * The global art market was the highest yielding investment in the past year, reporting an average yield of 11%
8 March 2012
An all-time sales record was broken this month at the Tiroche Auction House. Revenues derived of the sale, consisting of over 90% of the items, totaled $3.5M. Considering the fact that the Israeli art market is estimated to turn over $50M per year (half in auctions and half in private sales by galleries and artists), this is an unprecedented achievement in which over 10% of the market share was attained in a single transaction.
“Despite its relatively small scope, the local art market aligns with its global counterparts, becoming a worthwhile investment channel”, explains Shiri Ben Artzi, initiator of the first Fine Art and Finance Conference in Israel, which will be held in Tel Aviv at the end of the month. “The global art market was the highest yielding investment in the past year (2011), reporting an average yield of 11%. This is a significant achievement as it is a market that competes with traditional investments, such as debentures, commodities and stocks.
“The Mei Moses fine art index (a unique index that compares profits derived of works in the past and present) beat the S&P 500 index (comprised of the 500 leading public companies in the U.S.) for the second consecutive year. Over the past decade, art has generated an average yield of 7.8%, much more than many leading Wall Street indices”
These figures join surprising figures on global sales. They reflect growth, evident in a 15% increase in profits on sales, as reported by Artprice.com, a website that monitors auctions worldwide. The investment in impressionistic and modern art has yielded an average of 14% this year, as opposed to an investment in contemporary art, which generated a yield of 6.4% and other 19th century art, whose yield totaled 4.8%.
The Tiroche sales figures reflect this trend. Nachum Gutman’s “The Kiosk at Neveh Sha’anan” was sold for $178K, after being valued at $100K. Reuben Ruben’s “On the Road to Safed” was sold for $101K, following prior estimates of $50K, and record prices were noted for veteran artists like Moshe Kupferman ($65K) and Leah Nikel, whose painting of the Gabby and Ami Brown collection was sold at a surprising $52K, after being assessed at only $20K.
How do you explain the consistent increase in yields?
“Art is a worthwhile investment because the market does not suffer from the trends that impact the other markets, such as tension or sudden fluctuations. Israeli collectors are very much in synch with world events and they understand the growing value of their collections. There is now a clear understanding that an art collection is a yielding asset, just like any other traditional investment. Therefore, this arena is joined by major players, such as banks and venture capital funds dedicated to investments in art. In all, Israeli art is still highly available and can be purchased at relatively low prices. New generation collectors can purchase a piece for $1-2K and, based on these performance figures, their value will increase very quickly.”
In Tiroche’s last sale, a small piece by Aram Gershuni, a young artist, was valued at $3K and sold for $24K.
“The world has directed a spotlight to developments in Israel, for several reasons. The Venice Biennale did us a great service. Sigalit Landau in the Israeli pavilion and Yael Bartana in the Polish pavilion, both senior artists, attracted a great deal of media attention. The renewal of the Israel and Tel Aviv Museums adds a great deal to our intentional exposure, generating a great interest among the collector community around the world. Recent auctions report that many buyers participate over the phone. In other words, they are not from here.”
Just as Christie’s and Sotheby’s stopped operating in Israel?
“The global art market is estimated at $3B per year. Christie’s and Sotheby’s make $1B in sales every year, so the size of the Israeli market does not justify their presence here. On the other hand, their departure benefitted the market, because they sell Israeli art, further increasing its exposure around the world.”
Ben Artzi, 36, understood the market’s financial potential even before the buzz began. “I completed my graduate degree in Visual Arts Administration at NYU in 2005 and wanted to write a thesis on the profile of a venture capital fund specializing in art. My thesis topic was not approved because the concept was unfamiliar at the time and there were insufficient models available. Today, such funds are very popular, such as Gil Brandes and Chemi Peres’ Artpartners. I eventually examined the feasibility of art as an alternative investment channel because I knew that the market was veering in that direction.”
Ben Artzi interned at the Gagosian Museum in New York and in Sotheby’s contemporary art department and, upon graduation, opened a consulting firm for collectors. She currently owns a gallery at the New Station Compound in Tel Aviv and is a member of the Bezalel board of trustees.
“The new idea is to integrate models from the financial world into the art world. The global endeavor in this regard is to establish an exchange dedicated to art, which will be opened in Luxemburg this June.
“Nowadays, people with over $1M in the bank own an art collection as part of their business portfolio. Banks grant loans against collections and dedicated art investment funds are constantly being opened. Art has become a legitimate investment option that can generate a profit even without requiring the acquisition of works.
“Motti Shneiberg, for example, is an Israeli hi-tech entrepreneur who founded APT, a fund held by shareholders, to which artists contributed five pieces each, in order to ensure long term financial security. This is a clear pension model adopted and applied to the art world. The fund currently owns one of the most interesting collections in the world, assessed at $45M.”
Based on this trend, Ben Artzi and her partner, Aya Shoham, identified the need for presenting the art market to new forces and providing information on the underlying business potential. The conference that they are conducting at the end of the month will be attended by senior figures of the art world, collectors and members of the financial community, who will discuss the emerging market.
“First, the new collectors must be told where the money is at: the art market consists of a primary market in which the players are the artist and the gallery. That is where their work is presented for the first time, where the artist establishes his status and where he is first exposed to collections, important collectors and museum exhibitions.
“Following this initial introduction and after acquiring a worthy status, commerce shifts to the secondary market – the resale market. Where the reason for reselling works of art used to be debt, divorce or death, people now take down their paintings because they realize that they are worth a great deal of money. The secondary auction market becomes very important, it is the open and reporting market in which the prices are set.
“But one must know how to participate in auctions as well. The artist or his gallery, who feel that the value of the works has declined, often take advantage of the sale platform in order to raise the price and conduct a ring auction, i.e. intentionally raise the price in one sale in order to define a new threshold. A skilled buyer will be able to attend the sale and identify the move, refusing to take part in it.”
Leading banks around the world provide consulting services for investing in art as part of their financial consulting services. In Israel, Bank Leumi and Bank HaPoalim are affiliated with the art world, staging large annual exhibitions. Where does this affiliation come from?
“The large financial institutions know how to identify large monetary transactions, not to mention that dealing with art contributes to their status and is essential to local art. The bank enjoys the cultural image, it has the opportunity to host its clients (at an exhibition) and it becomes a player in a hot and contemporary field.”
What are today’s hot global trends?
“The two most expensive pieces sold this year were painted by Chinese artists. Qi Baishi's “Eagle Standing on Pine Tree with Four-Character Couplet in Seal Script” sold for $57.2M and a piece by Meng Wang sold for $55.3M. 30 of the 100 most expensive pieces auctioned around the world in 2011 came from China and the Chinese auction house made more money than the traditional Sotheby’s and Christie’s. Other interesting markets including the Indian and Korean markets.”
What are the leading types of art?
“Photography has generated a great deal of interest with record sales of $4.3M by German photographer Andreas Gursky. Cindy Sherman also sold for $3.9M this year. Video art is a rising field, currently part of almost every major collection. But despite the advanced display methods, people still find it difficult to purchase a CD as a work of art. Sales figures in Israel and around the world demonstrate that modern and impressionist art are still in the lead. A record price was paid this year when the Qattar oil principality purchased a piece by Paul Cezanne (“The Card Players”) for $250M.”
So what is the answer to the Million Dollar question – How do you identify a promising artist?
“First of all, being familiar and knowledgeable with the market is a good start. And yet, I always advise my clients that the first measure for buying is a strong emotional attachment to art. After that, one must see that the technique is good and the quality is high, look into the artist’s biography – where he studied and for how long – and try to meet him to see how dedicate he is. As in any profession, it is easy to identify a good and dedicated professional. That is the key: once you identify a player with heart – he will be stay around forever.”