First person

When investment becomes an art

That record £65m Giacometti sculpture sale has focused an exciting new spotlight on the opportunities – and pitfalls – of investing in art.

When acclaimed fashion designer Alexander McQueen died in February, sales of his label shot up by 1,500 per cent. Overnight, his garments were transformed from the wearer’s wardrobe to collector’s display case.

Creative endeavour is often valued for its rarity. That’s partly what drove the record-breaking £65m-plus paid a week earlier for Alberto Giacometti’s life-size bronze sculpture auctioned in London.

Starting at £12m, it took just eight minutes for bidders to reach the astonishing final price for L'Homme Qui Marche. Sotheby’s say that – by a sizeable margin – it was the most expensive of the Swiss artist’s works ever sold at auction.

That star sculpture was part of an auction which also saw 17 pieces go under the hammer for more than £1m each, with three reaching above £10m apiece.

The market has also seen Gustav Klimt’s Kirche in Cassone go for more than £27m, more than twice its lower estimate. And Paul Cezanne’s still life Pichet et fruits sur une table was sold for more than £11.7m.

The prices may be exceptional, but the trend isn’t. Art market watchers have been especially intrigued by the way Giacometti’s sculpture, as one observes,  “represents the recession from beginning to end – it was being auctioned as an asset of the failed Dresdner Bank and the remarkable price undoubtedly signals a resurgence in the art market.”

The recession has certainly intensified investors’ focus on commodities. And art, it seems, is enjoying some of that attention. So far, it has withstood the recent tumultuous economic realities – although, as one dealer comments, previous economic cycles showed that art investment was often the last to go down in a recession, but also the last to revive.

In one sense, cash-rich art investors may be benefiting: one aspect of the global financial crisis is that valuable pieces — previously off the market — are reappearing as individual and corporate owners (like Dresdner) sell to replenish their balance sheets.

According to one report, Beautiful Asset Advisors, a US firm specialising in art investment trends, now believes that today’s level of art buying activity is comparable with the frenzy of the mid-80s.

All the same, investing in art during a recession should still be approached cautiously, without taking anything for granted. You could pay high for an extremely beautiful piece of art, but if it doesn’t appeal to future buyers, it will be a fruitless investment.

So, for the novice investor and the seasoned collector alike, there are a number of things to consider. First, like any specialised investment arena, do your homework: understand what makes the work valuable today, and what’s likely to contribute to its growing worth.

And take advice. Patrick Bourne of Edinburgh’s Bourne Fine Art says: “The price differential between quite good and very good paintings by the same artist can be huge. You have to do your research. Basically anything of lasting value must have art historical significance, and if you don’t know the context, find someone you trust who does.

“Buying art is a mid- to long-term investment – and you need to be able to live with your purchase. That’s your main investment. And, like any investment, timing is important – when to buy and when to sell.”

A number of indices track the global trends and valuations in art dealing. The entry level for investing in known artists, however, can be prohibitive. So study new artists, too – works by new Chinese and Indian artists, for example, are becoming popular, following Saatchi’s interest.

The key assessment is whether these will increase in value down the line – and how long that line is likely to be. One caveat is not to simply follow a fashion fad. Know what you like. Read and learn about an artist who interests you, their style of work, and what inspires them. Many artists will let you visit their studios.

In the long run, your taste in art will matter more than its monetary value. All dealers know the meaning of an investor ‘who has the eye’. But, when you’re buying art as an investment, remember – enjoy it!