When a person is searching for alternative forms of investment and diversification of risk, finding a market which is shown to have an almost nonexistent elasticity and a resistance to the blows of a crisis, the Art Market, is an intelligent option to protect your capital. But as with every economic investment you have to act in an intelligent way and with all the information that the market throws at us.
The art economy has developed in an exponential way and it is not strange to hear about the exorbitant figures of millions of dollars that are spent in the big auction houses, such as Sotheby’s and Christie’s. In those places it is common to hear that “art is the best investment,” “art never devalues” “works of art always acquire more value”. Common sites and common discourse to justify the acquisition of an art work from the seller’s side. However we have to be very cold and honest with ourselves if we want to acquire an art work on an investment capital level or on a decorative level from an aesthetic point of view, because only in that way will we see art as a real asset, like gold or real estate property, meaning with stable yields.
It is important to clarify certain reference points in art as an investment:
To separate the aesthetic value from the economic.
Making an economic investment in art will effectively allow you to surround your life with beautiful pieces, but not for this reason should your judgement be limited at the moment of selecting a work towards the genuinely aesthetic, in the end if you are making an investment decision, it not necessarily has to be the work you like the most, but the one that projects the most yield according to your expectations. At this point it is necessary to think about art investment beyond the emotional intrinsic value of the work.
Professional advise is an option for an intelligent investment. It is necessary to take into account all the factors that surround a work, and in the case of art this is not solely limited to a knowledge of economic variables and statistics of a work, but also an understanding of art and the aesthetic that acts upon the piece. That’s why it is indispensable to consult with someone who has the tools to help you to take the best decision.
The patience of the rich.
In the market there exists a maxim, if there is an urgency to sell something, in the end it will make a loss. It is necessary to maintain the asset in the market consistently, be patient, have clear expectations of what return is expected from the work, and when you have an opportunity, liquidate it. Attachment to a piece can prevent a return on your investment if the primary objective of the purchase was an economic one.
Let’s take a practical example. Let’s analysis the work of Sergio Hernández a Oaxacan painter of international renown, with numerous exhibitions in Europe and the United States, besides from having obtained the distinction Cruz de oficial de Isabel la Católica from the embassy of Spain. A simple look into the résumé of the Meastro Hernández makes it clear that an investment in Sergio Hernández’s work is a winning investment. But the criteria doesn’t have to remain there. Let’s examine the last auction prices of Sergio Hernández from 2011 to 2014 in Mexico. For this specific case we will take the pieces of oil over linen and oil over fabric auctioned in this period, with a size between, 6,000 and 20,000 cm2.
Using the information from the world bank for annual inflation in Mexico and bringing to present value the prices per cm2 in dollars of the chosen works, we have an average of 2.7 dollars per centimetre squared.
Now if we put this into a graph, price per cm2 on the axis of the ordinates and the year on the axis of the abscissas, except for a light decrease in the 2012-2013 period, the work of the Meastro Hernández achieves to double its value. A fact that almost no other asset in the market is capable of achieving. With this type of analysis it is also possible of making a statistical prediction through a polynomial to project its price in future years.
With this example, I want to clarify the idea that investment in art is definitely an excellent option. However the making such an investment should be aided by a specialist able to understand these types of variables and in that way helping to take the most intelligent and appropriate decision for what we are searching for. Art is a way of feeding the soul through the manifestations of feelings, but if we act coldly we will have before us the opportunity, of not only maintaining the soul but also the body. Consequently it is convenient to invest in art.
Jose Joel Escobar Avendaño
ITAM Actuary with experience in the financial sector, probability and statistics. Art lover and founder of UNO61 CASA DE ARTE, art consultant and with studies in art valuation.