Top notch investments. Repeated selling price indices. Rate of return. Securitized funds. Commodification. Splitting.
The slang for art as an alternative asset class is well established, if not its track record as a reliable way to earn money. But do we get to a point where this way of thinking, like art history, has finally become rubbish?
Earlier this month, various media outlets reported that art was the top-performing “passion investment” in 2022, with annual returns reaching 29%, according to the Knight Frank Luxury Investment Index (KFLII).
Successful auctions of several prestigious single-owner collections, such as those amassed by Paul Allen and Anne Bass, were key. “With provenance from a top collector, prime works regularly break auction records, and last year was no exception, with five fetching over $100 million,” says Sebastian Duthy from Art Market Research, which provides the data for the KFLII.
It seems the only way is through blockbuster sole proprietor auctions, which in terms of volume represent only a tiny fraction of the resale art trade. What about the rest of the auction market? How is it doing as an asset class?
London’s recent landmark series of modern and contemporary auctions at Sotheby’s, Christie’s and Phillips showed how difficult it has become to treat art as a commodity that can be reliably tracked on a Bloomberg commercial screen.
Young, NextGen, red-chip art – call it what you will – has become a problematic disruptor. Works by the latest generation of hard-to-find names of the moment regularly sell for multiples of their estimates (and gallery prices) at all three auction houses, and appear to be sucking up market demand for works by the self -called art history blue-chip. brands.
At the Phillips evening sale on March 2, for example, Untitled (Play the Hits), a large 2021 greeting card painting by American gallery owner-turned-artist Joel Mesler, went for £533,400 against a low estimate of £150,000. Mesler is currently the subject of a solo exhibition at the private Long Museum, West Bund, Shanghai (until April 18). A few batches later, Howard Hodgkin’s 2002-13 oil painting, summer rainlong validated by museums, sold for £292,100 against a low estimate of £500,000.
General conclusions should not be drawn from isolated results, but time and time again, during the evening sales of the three houses, there would be several six-figure auctions for works by young artists who appear in recent, current or future exhibitions. in galleries of taste. . The record £730,800 given to Christie’s for a 2021 abstract by Michaela Yearwood-Dan (included in the group show, Rites of passageat Gagosian, London, until April 29) and the also record £927,100 paid by Gagosian to Phillips for the 2014 pool painting, Thresholdby Caroline Walker (recently presented at the Adrian Cheng K11 Foundation in Shanghai) are other examples.
Coaxing millions of bidders for works by past or deceased artists represented in renowned museums proved to be a more difficult task. Kandinsky’s restored 1910 proto-abstract landscape, Murnau with Church II, was the Modernist masterpiece of the week, but Sotheby’s sold it for a one-time bid of £37.2 million, albeit a record for the artist at auction. The market for German Expressionism, one of the most influential movements in 20th-century art, looked set to collapse at Christie’s, where paintings by Ernst Ludwig Kirchner, Erich Heckel and Max Beckmann are estimated between £600,000 and £2.4 million. failed to sell.
by Kandinsky Murnau with Church II (1910), subject of a long restitution battle, sold for a single bid at Sotheby’s last month
Photo: Sotheby’s
All about trophies
“There has been a generational change in Germany. Collectors in their 40s are now collecting contemporary art,” says Hugo Nathan, co-founder of London-based art advisers Beaumont Nathan. Explaining the appeal of young art compared to museum-validated modern masters, Nathan adds: “You can bid £400,000 and be applauded. It’s a lot more fun than spending a few million on a modern piece that nobody notices. The market is now all about trophies and new art, and there isn’t much in between.”
Given that the new George Condo paintings that opened Hauser & Wirth’s latest gallery in West Hollywood in February have been priced at up to $3.5 million each, there’s some sort of financial logic behind someone who bets big six-figure sums on the works of young, socially-upward artists. And when auction prices for one set of catnip names start to peak, auction houses simply introduce another. This time in London, Anna Weyant and Jadé Fadojutimi (both now represented by Gagosian) walked out, and Joel Mesler, Michaela Yearwood-Dan and Caroline Walker arrived.
The fragmentation of the market into young art, trophies and the like, which the latest London auctions seemed to underline, also reflects non-financial seismic forces at play.
According Social acceleration: a new theory of modernity, a groundbreaking study by German sociologist Hartmut Rosa, published in 2013, the pace of technological change has made our sense of time seem to flow faster and faster, resulting in what Rosa identifies as a “shrinking of the present”. Unable to cope with the accelerated pace of life, our brains are more focused than ever on the present (as Sotheby’s has titled its latest contemporary art sales format).
This is a very different situation from that which prevailed in 1899 when Thorstein Veblen published his classic sociological study, The Leisure Class Theory. At this time, the new American coinage felt insecure about its social status, leading the Robber Barons to pay huge sums for 18th-century English aristocratic portraits. Today, “cool” has usurped class as America’s preeminent status symbol, say Joseph Heath and Andrew Potter in their 2006 book, THE Rebel Sell: how the counterculture became consumer Culture. Today’s plutocrats covet Banksy and Basquiat, not Gainsborough and Reynolds, and buying young, cool art makes them feel young. Moreover, as several contemporary sociologists have pointed out in updating Veblen, experiences are increasingly replacing possessions as signifiers of status.
But looking at the recently published seventh edition of The BMW Art Guide with its entries on 304 private collections of contemporary art around the world, aren’t these pages filled with very expensive goods? It’s true, but all those white cubes on concrete floors filled with new and newish art are also the residue of the international way of life of collectors, of what sociologists now identify as “the consumer experience”.
Keeping Collectors Sweet
Flying around the world for art fairs, auctions, biennials and gallery openings has become a distinct life experience for the relatively small group of ultra-wealthy individuals who rock the art world. contemporary.
“Essentially, it’s hands-on,” says veteran London-based contemporary art dealer Niru Ratnam, describing the concierge services needed to keep international collectors engaged with a gallery and its artists. “[The collectors] tend to be a bit older and like to be told there is a good dinner. There’s also a handshake to keep them in a gallery’s orbit,” says Ratnam, recalling a Frieze party in 2019 in which nine gallery owners competed to sit next to “their” collector. .
So where does that leave those very expensive trophies, like Kandinsky’s Murnau with Church II? Many in the Sotheby’s auction room were left baffled that such a historically significant painting fell to a single £37.2million bid from its third-party guarantor, widely rumored to be Sotheby’s owner Patrick Drahi . Why wasn’t there more competition? Why wasn’t it a “passion investment” for another world population of over 2,500 billionaires?
“It was just too expensive,” says Guy Jennings, senior director of the Fine Art Group’s advisory service. “It all depends on the number. If the estimate is too high, they don’t want to bid,” he says, referring to how fierce competition between Sotheby’s and Christie’s has pushed the valuation of unique trophy lots to off-putting levels, even for the super rich. At the Christie’s Paul Allen sale, flagship lots like Cézanne The Sainte-Victoire mountain (1888-90) and masterpiece of Lucian Freud, Large Interior, W11 (after Watteau) (1981-83), also sold at single offers.
For Jennings, the collectors’ focus on young art makes financial sense. “Money follows supply,” he adds. “There are a lot of artists and there are a lot of exchanges. But who knows if these artists will interest in ten years.
LAW. So that’s the current state of the art as an alternative asset class. Famous name trophies are overpriced. The same is probably true for most of the works of these young must-have names. And it’s getting harder and harder to sell things in between.
But what price can you put on the lifestyle?
