Contemporary Art: An Alternative Investment

Since Palaeolithic times, art has been an expression of human emotions and passions. So too has money and so the fact that art and money are inexplicably tied is not that surprising. What does surprise many, however, is the marriage of contemporary art and money. What is more surprising is that, in tough economic times, contemporary art seems rather recession-proof and, in fact, often times outperforms the stock market.

Helly Nahmad Gallery, New York. Photo courtesy of Art Basel

Back in the early ’90s, Morley Safer did a ’60 Minutes’ segment that echoed this surprise and expressed skepticism toward modern art as anything worthy, let alone worthy of investment. Indeed, Safer’s sentiments and resistance toward contemporary art were (and often are still) common sentiments. As David Liss, artistic director and curator of the Museum of Contemporary Canadian Art in Toronto, ON, explains “Some feel that new ideas, new thinking, and new art are a threat to the status quo. It may be easier to understand art, history, and humanity with a century of hindsight.” He adds, “Contemporary art is very much about challenging expectations [and] about challenging complacency of the imagination. Looking back through history, many of the significant discoveries, inventions, and ideas that have evolved our species forward in art, science, literature, politics, technology – in just about any field –have initially met with skepticism and resistance.”

Contemporary Art Today

More recently, Safer returned to the airwaves to admit that contemporary art has had the last laugh. Reporting from Art Basel, the world renown annual art fair held in Miami, FL, Safer pointed out that the art of Jeff Koons – the object of his skepticism 20 years ago when it sold for $250,000 – was now selling for $25 million. Similarly, artist Cindy Sherman, whose work sold for around $250 in 1982, now sells individual pieces worth $40 million and more. Asked what has caused this change, Liss says “perception has changed somewhat, partially because people are increasingly interested in what artists are thinking and doing, and many people are asking serious questions about the human impact upon the planet and questioning some of the ways that we’ve been conducting ourselves as a species. I find also that the ubiquity of generic mass-entertainment, the constant barrage of advertising, and the emptiness of celebrity culture are causing the more curious and adventurous among us to engage with more challenging subject matter – including art that examines these phenomena.

Lia Rumma, Milan: Vanessa Beecroft. Photo courtesy of Art Basel.

“It’s also helpful that, for several reasons, from about the mid-1990s, contemporary art evolved into a multi-billion global industry and if people don’t understand art, culture, or the human spirit so much, we all readily accept and understand the power and influence of money. If some people have difficulty understanding the deeper, intrinsic value of art and culture, they have an easier time understanding it from a financial and business perspective.”

Indeed, contemporary art today is not only a symbol of status, but is a powerful speculative mechanism. Divided into collectors and speculators, contemporary art boasts its own museums, sees $5.5 billion a year in auction sales alone, and is in a world where price fixing and the control of supply and demand are not just okay, they are expected. While art experiences fluctuate along with the markets, some contemporary art has dramatically outperformed the stock markets, particularly in hard times.

Long-term Investment

In discussing the increasing trend toward contemporary art as an investment, Simon Cole, director of the Cooper Cole Gallery in Toronto, ON, notes that “With living artists attaining record prices at auction, it has become very desirable to invest in the arts. I think that technology has played a huge role in the growth in the art market as well. With the power of the internet, art galleries, auctions, and even art fairs are no longer regional and can reach collections across the globe. It has always been fashionable to collect art, but now it is easier to access it as well.”

It seems Morley Safer tipping his hat in concession to contemporary art is well-timed as interest in the contemporary art market is growing and prices continue to rise. “There is a fantastic generation of younger artists producing top work now,” says Cole, “and it is quite exciting to watch. Collecting art is a rewarding investment – you can enjoy your collection in your home or office rather than on a computer screen or in a portfolio. It is a long-term investment [that] can be enjoyed immediately.”

Indeed, like traditional art, contemporary art is best viewed as a long-term investment. As Cole points out, seasoned art collectors have a vision. “It takes a special kind of person to support an artist while they are beginning their career or are in a stage of development. Art is an investment in people and personalities and should be thought of as a long-term commitment.”

Stephen Friedman Gallery, London. Photo courtesy of Art Basel.

Who is likely to venture into these long-term commitments? Cole finds that many of the art investors of today are young international art collectors and contemporary art as an investment seems to be attracting increasing attention. While Cole notes that most of his sales are to private collections, he has seen recent interest from corporate collections as well. “It is fantastic when corporations build collections. Not only is it a smart investment option, but it adds a level of prestige and creativity to an office environment. And, in some cases, corporate art purchases receive tax deductions as well.”

Investment Considerations

Cole’s advice to investors considering contemporary art is to “focus on [the artist’s] resume. You want to make sure you are collecting an artist with a forward trajectory. Consider things like an artist’s exhibition history, whether they have shown internationally, whether they are recognized by institutions, and what types of collections have acquired their art.” He adds that novice collectors should develop relationships with galleries and look at as much art as possible, but, mostly importantly, because there are no guarantees, people should buy what they like.

While alternative investments hold very real potential and contemporary art has the potential to make sizeable returns, Liss agrees with Cole and cautions that while “the right investments in art certainly hold value over time better than most commodities, art is not a particularly liquid asset. I would only ever recommend that people acquire art because they are interested in it. Art as a game of financial speculation can be very risky – as all investments can be. As is normal I guess, the largest and most expedient gains are at the very high end; the big stakes. People unfamiliar with art that may have heard of record auction sales through the media often ask me, ‘If I buy a work for $1,000, will it be worth $100,000 in the next five years?’ Certainly it is possible for this to happen but again, as with any market, you have to be knowledgeable and astute, you have to be smart, you have to be well-advised, you have to be on top of the latest developments and trends, [and] you have to be ahead of the game. I highly discourage uninformed involvement in the art market. If you’re not prepared to play with the big boys, then you buy art because you like it, because you believe in living with ideas.”

Karen Treml is staff writer with Private Wealth Canada ( email Karen ).