Topic: Art Museum Gallery
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So which are these alternative investments? Well, in today’s liquidity fuelled world where you often see “investors possessing more dollars than good sense” you find money chasing the unlikeliest of assets. I have read stories about well-heeled investors investing hundreds of thousands of dollars in forests, wine and so on…
For the purpose of this article, I will eschew esoteric assets such as the ones mentioned above and will dwell on “traditional” alternative investments in the form of art and antiques. Both these have caught the fancy of investors recently. The Indian art scene is witnessing a lot of action, with both art prices as well as the number of art auctions hitting new highs. Art galleries are seeking to differentiate themselves through branding and Indian artists are enjoying hitherto unprecedented levels of global attention. The hype and hoopla surrounding art is tempting several traditional investors to dip their toes into these waters.
Yes, there have been a few lucky people who bought a painting or a sculpture for a few thousand rupees, only to sell the same at many multiples of their purchase price. These people often become celebrities in the eyes of the media prominence by the media and that may encourage you to take steps to emulate them.
How rewarding has art investing been in recent times? The graphs given below, answer that question in one word “Very”.
However, is “Art” everyone’s cup of tea? Not quite.
Prospective investors should be conversant with the unique features of these investments. These are:
1. Art and antiques are extremely vulnerable to fluctuations in public tastes and other factors, so they are considered high-risk, speculative investments.
2. Many believe that you should buy art and antiques primarily because you like them, and only secondarily because they may return a profit.
3. Do not over invest in this asset class.
Despite certain peculiarities, investing in art is not very different from investing in other asset classes.
The difference between investing and speculating is applicable here too. The difference in the two activities involves time and degree of risk.
In speculating, potential risks and rewards are high and the time span is short.
The pre-requisites to succeed in speculation are in-depth knowledge of the investment, quick mental reflexes and nerves of steel. In contrast, investing takes place over a longer time span at a more moderate level of risk. As mentioned above, art and antique prices are extremely vulnerable to fluctuations in public tastes (in addition to other factors associated with most investments), they are considered high-risk, speculative investments.
Also, investment-quality art and antiques are expensive and usually not an option for the small investor. Art and antiques are not a “liquid” investment. This means that they generally cannot be resold quickly for a profit. One reason is that the market for these items fluctuates. If you need to sell your items quickly and the market is down, you could lose money. To earn decent profits, you may need to stay invested for a very long time.
However, art and antiques enjoy an aesthetic edge over other assets, in that they can be used to furnish a home or office thereby enhancing their pedigree.
While art and antiques can be utilitarian, they also can be cumbersome and costly. Often they are fragile, requiring proper environmental conditions, regular maintenance, adequate insurance and security, and frequent appraisals. Transportation, marketing and selling also may be costly and time consuming.
I am hereby reiterating some basic rules to be followed while investing in art:
Find a reputable dealer who has been in the business for many years — long enough to know about quality, market trends and pricing practices in the field in which you want to collect/invest.
Limit the field of your investment collection. Just as holding too many stocks adds very little in terms of incremental diversification, so does holding too many works of art.
Obtain a written appraisal or certificate from a leading appraiser or certifier in your field attesting to the quality and authenticity of the item. This is of paramount importance, as there have been several cases in Mumbai recently, when reputed art galleries inadvertently conducted auctions of fake paintings.
Risk is reduced by information. Read everything you can about your specific area of interest. Consult museums, universities and other collectors or dealers and refer to trade journals (if any), magazines, books and related websites.
As far as possible, purchase top quality items. Top-quality items are expensive (just as top-quality stocks command higher P/E ratios) but they tend to appreciate even during difficult markets. Second and third rung works of art may cost less initially, but may prove to be very costly in the longer run.
Insure the item adequately. Most homeowner policies allow for fire and theft but not natural disasters, such as floods, or accidents. Have your works included on a scheduled form of all risks for coverage in the event of theft, fire etc.
Maintain the artwork properly. If repairs are required, they should be made only by well-trained experts. The value of a poorly maintained artwork diminishes rapidly
Avoid putting more than 10 to 15 percent of the value of your investment portfolio into such investments. Most authorities agree that exceeding this limit may subject your entire investment plan to a high level of risk.
A word on “quality”
Top quality is the best investment. The following generalized guidelines should be helpful in identifying quality:
Build a rapport with art dealers:
Reputed art dealers will have years of experience to offer, and most are willing educators. However, be prepared to pay a steep price for such “education” as most dealers and galleries who operate at the retail level generally indulge in a 50 to 100 percent markup to the buyer.
Auction houses can serve as excellent sources of art and antiques for slightly experienced investors. Two major advantages are the sheer volume and variety of items offered, and the lack of retail markups, resulting in lower prices. Most publish pre-sale exhibition catalogs describing the items to be sold.
Investing in antiques
Many basic rules of investment in art apply to antiques too:
1. If you are buying as antiques as an investment, the key word is “specialise”. Don’t buy a range of antiques, as “collections” will often appreciate in value more than a mix of items. Good craftsmanship will hold its value, as will pieces by famous makers. Also, signed objects have better resale value than unsigned ones.
2. It is important to research before investing. Before making your first purchase, try to learn as much about your chosen field as you can. “Caveat emptor” applies in its purest form while purchasing antiques. Fakes and reproductions abound and what seems like a good buy may prove to be a “lemon”.
3. Purchase through a recognised dealer. You will be paying a higher price initially, but consider that as a safety premium. Also, insist on accurate and complete documentation. A good provenance adds to the resale allure of an object as it testifies that the piece is authentic.
4. Invest in antiques with the firm belief that it is a medium to long-term venture. Also, tempting as it may be, do not invest in works or periods which are currently “hot and happening”. You may be left holding the baby in case of a market decline. The illiquid nature of this market will magnify the pain.
5. Treat your investments with love and care, as unlike stocks, antiques and artworks are hard assets and are prone to physical deterioration if neglected.
Other salient points to watch out for :
The Indian Art scenario
The first professional Indian art auction was conducted by Christies in 1987. The first Indian painting to fetch a million rupees was M.F. Husain’s tribute to Safdar Hashmi in 1989. In the ’90s, the works of M.F. Husain, Raja Ravi Varma and Ganesh Pyne dominated the auction landscape in cities like New York and London. HEART was the first professional Indian outfit to conduct an auction. This was in 1997.
Since 2000, the growth of the domestic market has accelerated. Osian’s – India’s first art auction house was set up in 2000, followed by Bowrings and SaffronArt (India’s first online auction site).
It is virtually a truism to state that the Indian art market has never been in better shape. In the last three years many art works have fetched over 10 million rupees. The most prominent reasons for the same are :
Increased purchasing power:
Todays, yuppie Indians as well as well-heeled NRIs are evincing keen interest in purchasing artworks. Osian’s, a well known art auction house estimates that the number of NRI buyers should rise around 16 times from the current level of 125 to 2000 by 2007. A telling indicator of the growing interest in auctions is the fact that the paintings sold in Osian’s first auction in 2001 fetched an average price of merely Rs. 1,35,000 while the auction held in September 2006 fetched an average price of Rs. 66 lakhs.
Also, many buyers are buying for the long term. Hence, supply shortages may surface in the near future owing to a shortage of good floating stock.
Despite these statistics, however, there is a feeling that the Indian market is still at an infant stage and the market for around 85% of the artists remains below the sustainable equilibrium level.
History as a base for credible pricing:
Greater knowledge as regards the links between artistic historical significance and the pricing of art has led to the formation of credible benchmarks (such as the ET Art Index).
Increasing respect for archival and documentation work:
Today, investors have access to credible information in the form of high quality publications of historical and archived artworks. This has helped in pricing stability.
The “bleaching” of our economy:
The slow but steady transformation from a chiefly cash economy into a predominantly white economy has led to higher transparency, leading to confidence in displaying and exhibiting works of art openly. This is also helping art emerge as a permanent portfolio component for many institutions. Hence it is apparent that Indian art is set to grow in stature.
Launch of dedicated Art Funds:
This is more a fallout rather than a contributory cause to the art boom. Two art funds have also been launched recently. Edelweiss launched the first Fund known as “Yatra Fund” in September 2005 and garnered a corpus of Rs. 10.75 crores. Osian’s recently launched Art Fund garnered an impressive Rs. 102 crores. This fund aims at providing investors capital appreciation through the holding of a cohesive, historically driven portfolio of investment and management in the Contemporary Fine Arts from the Indian sub-continent.
Artists Pension Trust (APT) is a unique international art mutual fund, which plans to raise money in India soon. APT plans to act as a venture capitalist for artists by sourcing money from investors and funding artists who have the talent but not the cash. Each artist, in turn, pledges to hand over 20 of his/her paintings over to the fund over a period of 20 years From the work sold, 40% goes to the artist, 40% goes to the pool of the Trust and is distributed prorata among all the artists and the remaining 20% will be subject to certain holdback, distributed as a management fee to a group subsidiary.
It is debatable whether the market is ready for art funds but it is commendable that a start has been made.
Some of the possible factors that may apply the brake to the momentum are:
The bandwagon effect:
Today there are several art galleries springing up in order to capitalise on the interest on the part of investors. Many of these are first generation gallery owners whose knowledge of art is minimal. It is vital that gallery owners and auction houses undertake adequate due diligence in order to ensure that investors are not saddled with fake paintings or dud antiques.
Safekeeping and insurance:
Both safekeeping standards as well as Art insurance have miles to go before they can be compared to Western standards. Art appraisers and actuaries are hardly adequate to meet the growing demand. Also, insurance companies have not structured insurance products for this market. The sooner that happens the better it is.
Drying up of liquidity:
There are many sceptics who view the resurgence in the art market as a by-product of the wave of liquidity worldwide and hence fear that a reversal of this trend may lead to drying up of interest in art. Of course, one cannot discount this possibility entirely. However, it may also happen that the market will settle at a level much higher than that prevailing around three years ago.
Currently art enjoys the same tax treatment as hard assets such as real estate and gold. Any adverse change (though seemingly unlikely) on this front may damage the market’s growth momentum.
“Creamy Layer” Investment option:
Also, it is unlikely that the common investor will be able to afford to invest in reasonably good quality paintings in the near future. Hence it will remain a passion of the rich.
As the common investor’s money is not at stake, the Government too will not be motivated to strictly regulate the industry. Hence investor acceptance and comfort levels will also hinge on the extent and quality of self-regulation undertaken by the industry players.
In conclusion I state that while the road ahead is a bit foggy there is no doubt that the foundation is slowly being laid for the next level of growth and it will only be a matter of time before art occupies its rightful place as a permanent part of a High Net Worth investor’s portfolio.
On Thursday, the city bank of Buenos Aires, Banco Ciudad, which prides itself on being the country’s top bank in the auctions business, holds its third “super special” auction of the year - and is already bracing itself for a packed auditorium and telephone lines buzzing with bids, amid what it says is a “sustained growth in public interest in investing in art”.
In Argentina, where private estimates reckon inflation will end the year at 25 to 30 per cent (well above the discredited official data, which reports that prices have risen 6.7 per cent so far this year), buying art may be a new hedge.
It could also be a way for Argentines to maintain a sense of sophistication. Argentines gloried in their humble peso being equivalent to the mighty dollar during the 1990s - until the unsustainable currency peg spectacularly collapsed in 2001-02.
Whatever the reason, visitors to the auction section of Banco Ciudad’s website have doubled in the past month and there are 20 requests a day to receive auction catalogues online for bidders to browse the relative bargains on offer.
Reserve prices for Thursday’s auction of Argentine artists start as low as 1,500 pesos ($380) and the biggest ticket work is Vito Campanella’s oil on canvas, “La Payada” , which starts with what the bank calls the “very tempting” price tag of 15,000 pesos ($3,800).
The bank’s first two auctions this year raised more than 4.4m pesos ($1.1m) and artworks have gone under the hammer for more than 50 per cent more than their reserve prices.
This experience in Argentina illustrates a wider trend: the rise of art as a new emerging asset class. Forget bonds, stocks, forex or even copper and soya. Bric art is booming, as this article highlights.
Latin American art was the best performing regional art index in the past 25 years at the end of 2009, according to Beautiful Asset Advisors, whose founders Jianping Mei and Michael Moses track the performance of fine art sales against equity market returns via their MeiMoses fine art indices.
Latin American art’s performance has sloped off this year - the following graph shows how it lags the resurgence in demand for post-war and impressionist works - but it remains “very vibrant and viable, especially as wealth continues to accumulate”, according to Mr Moses.
Castlestone Management, a UK fund manager which last year launched the first retail art fund, offering institutional and individual investors the opportunity to diversify out of traditional asset classes, says that when the value of money falls, the value of art, like that of gold, rises.
As its CEO Angus Murray, puts it, art is “an irreplaceable, unleveraged real asset which responds well in a time when the possibility of inflation is on the horizon alongside the rapid decline of the real purchasing power of money.”
Soaring bid and sales volumes at New York and London auctions since late last year prove confidence in the art market is back. “People haven’t suddenly become cultured, it’s a hedge against inflation and shows art is becoming more and more a respected asset class,” says Constanze Kubern, Castlestone’s senior art adviser.
Though “blue chip” artists can prove costly investments - Pablo Picasso’s “Nude, Green Leaves and Bust” sold for $106.5m in New York in May, setting a new world record - art gets good returns, as the following chart from Castlestone shows:
And there is plenty of upside yet. Castlestone expects art prices to rise 40 per cent over the next couple of years as the market recovers from lows in 2009.
Emerging market and Latin American art was on the up before the 2009 economic downturn, and is now picking up steam again. Phillips de Pury, one of the other big auction house alongside Sotheby’s and Christie’s, held a Bric auction in London in April, and Latin American art was showcased in the Pinta art show in London in June, a expansion from Pinta’s roots in New York.
Bric and Latin art can be speculative and thus risky, and Castlestone doesn’t own any Latin American art yet - it focuses on the “golden middle” of post-war art where prices and returns are good. But Kubern said she had Colombian artist Fernando Botero on her shopping list.
So emerging market investors may want to grab their cheque books and rush to get seats at the October-November auction season in London and New York. And make sure they have enough cash left over for the ArtBasel fair in Miami Beach in December.
Real Estates Development and boutique hotel in the Villa of the Valley of Tulumba, known as an open-air Museum, Cordoba, Province in the heart of Argentina After the 2001 crisis in Argentina, the so called one to one economy was replaced by an other strategy: devaluation. This means that what on 2001 cost 200 pesos, or 200 dollars, nowadays is just 66.67 dollars. All prices have been rearranged considering this new economic plan that's been organized by the Argentinean government together with the IMF and the World Bank. And Real Estates are no exception, the proportion in which properties all over Buenos Aires have drawn depends of course on many factors, such as location, type of property, etc. At the same time the Argentinean economy has been reconditioned to work in a new configuration, a service area that has been growing ever since is tourism. All throughout the 90s visiting Buenos Aires -our capital city- or taking some time off at one of our magnificent sky centers in the Patagonia region was as expensive as touring through Rome, Paris or skiing in Switzerland. Nowadays for the exchange rate is so favorable towards the American or European currencies Argentina has become a much more appealing vacation resort. For those who love and enjoy great dinning, terrific sights in a dream holiday and don't want to be robbed off by the extraordinary high European rates this is the answer. No wonder the constant flow of visitors we've been having lately. At the same time judging by local and foreign statistics there's been a growth in two specific developing markets: business travel and more specifically collectors. They have long noticed the potential of locally produced items of yarn and are now taking on an increasingly growing market. This gorgeous metropolis has all the luxury and comfort to offer its visitors with high class lodging, delightful food and amazing cultural and social activities. However, within the developing collectibles market there's much to do. In terms of products and information, The Buenos Aires Toy Museum has been in the vanguard of information and items collection ( www.the-ba-toymuseum.com ).Working locally and in collaboration with American and European fellow collectors this museum has been rescuing this historical and cultural patrimony as well as recovering those amazing one of a kind vintage objects. The museum has been developing so far within the Internet. In the world of collectibles the globalized technology is our best allied for it allows us to connect worldwide with fellow collectors, exchange valuable data and items for our collections. To give the museum a physical location is the obvious next step in its evolution line. However, in these days the Museum's project has broadened into a collectors club. Considering the most favorable conditions within the specific market (collectibles), the evolution of Argentina's Real Estates market and the increasingly flow of tourists to these southern and beautiful lands we believe the best possible advance in this field is a boutique hotel. This hotel would be unique, for each room is in itself a personal show room with original vintage Argentinean collectibles. Our philosophy is simple, we truly believe in offering the top of the top comfort that one can surely get at any of the marvelous five stars hotels (Sheraton, Hilton, Four Seasons, etc) but within a very personalized atmosphere specially arranged to fit our visitors needs. The boutique and unique collectibles hotel would be located in one of Argentinean Provinces, Cordoba, in the heart of Argentina. This small village is an hour's drive from Cordoba's International airport, it's a tranquil Little open-air like Village-Museum, lost in time and space, surrounded by rolling foot hills of the Sierras Chicas of Cordoba, the old village, some 360 years old, reminds us all of the colonial and early 18th century past, an intense cultural and social atmosphere that makes this area the perfect location. The Buenos Aires collectibles boutique hotel is an outstanding inversion opportunity. The market's conditions couldn't be better. The timing is just as precise as it could ever be. This superb lodging is what Buenos Aires and its visitors need. Our Boutique unique hotel and collectors club would be the first one in Latin America, and there's no better place to start than Buenos Aires. For this port side city has historically been at the vanguard of Latin America's cultural and social development. A local unexplored market so far is awaiting to be updated to the world's latest trends in show rooms and lodging that will converge in this outstanding boutique hotel Latin American styled. Bob Frassinetti: For more information: Email: Bob Frassinetti. Press here to go back to web blog:Daily Updates on Art, Antiques, Collectibles as well as travel information for Buenos Aires, Argentina. Phone me thru Skype, ID: Bob Frassinetti or you can also chat with me thru Yahoo, press here: Yahoo Contact Find me on MySpace and be my friend!
Bob Frassinetti, travelling for arts and antiques in the south of South America,.......
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