Art offers alternative investment

PUBLISHED : Sunday, 02 October, 2011, 12:00am
UPDATED : Sunday, 02 October, 2011, 12:00am


For purists, 'art for art's sake' rather than for profit may be the mantra. But for a growing number of investors wary of traditional asset classes, collecting art is viewed as an alternative way of generating a return on investment.

'If you take into account low interest rates and the volatile nature of the global economy matched against the art market's huge gains of the past several years, it is easy to see why investing in art can look attractive to anyone with a view towards diversifying a portfolio,' says Nicole Schoeni, director and owner of Schoeni Art Gallery, which specialises in promoting Chinese contemporary artists.

According to Artprice, an art market information enterprise, China is the number one market in the world in terms of fine-art auction revenue. Last year, China accounted for 33 per cent of global fine-art sales - paintings, sculptures, drawings, photography and prints - versus 30 per cent in the United States, 19 per cent in Britain and 5 per cent in France.

While Schoeni has noticed an increase in those buying Chinese contemporary works of art, she says the trend started in 2004, when paintings by mainland artists began rising to headline-grabbing sums.

Among these was a painting by Beijing artist Yue Minjun, famous for his exaggerated laughter and wide-toothed self-portraits, which sold at auction for HK$50 million. 'Gweong Gweong' and another famous Yue artwork, 'Execution', inspired by the 1989 Tiananmen Square crackdown, which in 2007 raised US$5.9 million, were originally collected and sold by the late Hong Kong art dealer Manfred Schoeni.

Schoeni says while investors might dream of picking up a Yue-type painting, or works by other titans of Chinese contemporary painting, such as Wang Guangyi, Fang Lijun and Zhang Xiaogang, collectors should be realistic about their chances of turning a modest investment into a multimillion dollar return. 'Like any investment, the price of art can go up or down,' cautions Schoeni, adding that investors should not be put off from considering art as an investment.

She recommends investors purchase works because they like them. This way, any purchase provides its own special pleasure, and having the potential to increase in value. 'There are many variables that contribute to the value of a painting, including its provenance, the experience of the artist and the subject matter,' she says.

For novice art collectors and those with limited budgets, Schoeni recommends starting conservatively and consider buying limited-edition signed prints or photographs. She also recommends dealing with a reputable gallery and art advisers. 'Take your time and do your research about an artist, see what exhibitions he or she has done and which galleries represent him. Most importantly, don't be shy to ask the gallery/artist questions,' Schoeni says.

According to a RICS arts and antiques survey, the price of contemporary art rose at its fastest pace in three years during the second quarter of this year. K.K. Wong, RICS Hong Kong chairman, says the survey reflects positive market sentiment in Hong Kong and the mainland, where a lot of investors and high-net-wealth individuals are buying pottery, Chinese paintings, rosewood furniture and jade. As an alternative to hanging artwork at home, or in storage, Hong Kong-based Art Futures Group (AFG) offers an art lease programme, where artwork owned by clients is leased to businesses on a two-year contract. With a focus on Chinese contemporary art, investment sums per painting can range from HK$100,000 to HK$250,000. Investment pieces leased to a business are expected to generate about 6 per cent yield per annum in addition to possible capital gains.

'Our aim is to bring the concept of art investment to a wider audience. We are not in competition with art galleries or auction houses, we offer an investment service for private clients wanting to access growing opportunities and profits in the art market,' says Jon Reade, AFG director.

'Put simply, we guide the client through the entire process of trading art for a profit.'

Reade says investors are being drawn to the Chinese art market because they have been put off by other investment channels.

'We work closely with clients, so they can grasp principles of art investment, helping them to navigate the market and make informed purchasing decisions,' Reade says.

He says through constant monitoring of indexes and analyses of international trade, artist records and auction histories, AFG aims to educate clients on how to handpick promising mid-career artists and artworks with the highest potential return.