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Moneyweb Editor’s choice: invest in art

3 October 2011 - By http://www.arttimes.co.za/news_read.php?news_id=4942

As recession looms, should you spend large sums on coloured canvas?
JOHANNESBURG - As we all tremble at the threat of a double-dip recession, along comes a man from Sanlam Private Investments (SPI) suggesting that we invest in art.

Stefan Hundt, points out that good art is an asset that generally appreciates over time.

His art advocacy is well timed. Those interested can have a look at what’s on offer at the upcoming Joburg Art Fair sponsored by FNB at the Sandton Convention Centre. Hundt has no commercial interest in the show but reckons it is a good place to sample art wares.

While there is risk, many art investments have outperformed the Dow in the US and the Alsi in SA. There is actually no definition of what constitutes art and the field is full of fakes, phonies and charlatans, so, to an outsider, it seems perilous.

The Art Fund market boomed in the US in the early 2000s but only a few survived the turmoil of the 2008 recession without experiencing losses.

In SA significant superb individual pieces still managed to break sales records. Good quality works by established SA artists have held their value but did not see the spectacular escalations of the five years before where, paintings by Irma Stern doubled every eight–ten months. 

As Hundt says: “Anyone with enough money can buy a Bentley or a Lamborghini and the manufacturer will churn out more. But there is only one “Bahora Girl” by Irma Stern which sold for R26m (2010) at Bonhams in London. ��һ�Թ��� a year later another painting by Irma Stern, a portrait of a prominent Zanzibari Arab painted in 1939 sold for R30m at Bonhams in London.

Measuring the performance of art works against other investments needs to be done with some circumspection. The market for established SA artists from the 1970s–1990s remained essentially flat. There were some peaks as prominent individuals, such as Chiavelli, Brett Kebble and Dave King entered as buyers. Prices rose in the late 1990s and accelerated exponentially in the 2000s, when it became clear that the commodities boom was going to be around for a while.

During the Great Recession of 2008 art prices offshore held up remarkably well. Indeed, as Lehman Brothers crashed, bringing down much of the financial world with it, Christies in New York sold 57 works for a record $348m.

One painting by Mark Rothko fetched $50m and another by Lucien Freud $33m, which was the highest price for a living artist. Maverick British painter/sculptor Damien Hirst in 2008 sold a collection of his own works through Sotheby’s for £100m.

Art writer Lindsay Pollock said: “These people are so rich it doesn’t even matter. There are people all over the world who want this stuff, so it’s going to stay afloat.”

Hundt cautions that it is a high risk business for the uninformed. There are no dividends or interest in an art work, no stock exchange or banking regulations.

But there is great satisfaction in finding a good buy. There is also the enjoyment (and the prestige) of the work while it hangs on your wall - and the prospect of a big (tax free) capital gain when you sell. Art also tends to be a long term investment.

“The analyst who advises you on equities is generally playing a video based on the past. They are crystal ball gazers – no different from those of us who invest in art.”

You can lose on art investments. While the best artists defy day to day economic trends, some fall out of fashion and disappoint expectations.

You might even buy a fake. One Frans Claerhout was recently bust in the Free State selling “genuine fakes” over the internet. 

A print by William Kentridge recently fetched R600 000. There are 50 such prints, so that values that particular Kentridge image at R30m, evidence, says Hundt that the buyer overpaid. The shrewd collectors who bought these prints at the time they were produced for R 1 700 are of course boundlessly happy. Kentridge’s “Drawing for the Film Stethoscope” was expected to go for R1.2m but actually fetched R2m. Kentridge is SA’s most expensive living artist.

You don’t have to be a zillionaire to start. Some Pierneef prints and linocuts that were purchased for R2 000 have appreciated to R10 000 in quick time. Numerous works by well known artists can be had for R10 000 or less.

Boerneef, the Afrikaans poet and lecturer, who knew a lot of artists who were his contemporaries, bought art works from people, such as Maggie Laubser and Pierneef. His collection, worth millions housed in a historical home called Welgenmeend in the Cape was built on a lecturer’s salary.

Hundt says some works by leading SA artists, such as Irma Stern, William Kentridge, Pierneef, Walter Battiss, Alexis Preller and Maggie Laubser, have given investors super returns. In the field of sculpture, Anton van Wouw sells for half a million or more and some Edoardo Villas for R300 000.

Many of SA’s richest individuals have built up hugely valuable collections. The late Harry Oppenheimer’s collection can be viewed at Brenthurst. The late Dr Anton Rupert’s collection is now open for public viewing at the Rupert Museum in Stellenbosch. Paul Harris has a collection at Ellerman House, Cape Town.

Some of SA’s biggest companies have valuable art collections, among them: Absa, which has the largest number of works. FNB and Standard Bank have numerous high quality works to adorn their palatial head offices. Sanlam, Telkom, Engen, Hollard, Woolworths and, of all corporates, the SABC, have outstanding collections. Richemont, also synonymous with Rupert, has a fine collection.

Under Anton Rupert many collections were compiled from the early 1950s. Two entities were formed to incorporate these art collections -the Rembrandt van Rijn Art Foundation for SA works and the Stuyvesant Foundation for international works. 

The core of the Stuyvesant Foundation Collection finally moved with the unbundling of Remgro and the listing of British American Tobacco. BAT sold off the last of the collection last year. Rupert followed the lead of famous American collector Albert Barnes. Like Barnes, Rupert believed that good quality artworks enhance the working environment. In the 1960s, paintings were hung in the cigarette factory in Holland.

Since then almost every office block housing the Rupert companies contained art. Unfortunately corporates allow public viewing very rarely. Sanlam has a permanent display of works open to the public at its head office in Bellville and Hundt regularly compiles travelling exhibitions drawn from the Sanlam art collection.

To avoid fakes, Hundt advises anyone looking at a work by somebody famous to see that it fits into his or her oeuvre. You need to find out how the work came into the seller’s hands and whether it has been in exhibition catalogues.

Often, even with a dead artist, there are those who knew him or her and can verify authenticity. Fakes are usually not sold in art houses of repute. Hundt cautions that the SA market is infinitesmal by global standards and that prices in the last three years have been relatively subdued. Still, the top SA artists are becoming more widely appreciated. Bonhams of London holds two auctions of SA art a year.

He reckons that of SA’s population of 48m, only 4m have the means to buy art and, given our rugga bugga culture, only 1% of that number – 40 000 - actually pay for art. Perhaps 5% of that number – 2 000 – are serious collectors.

Thirteen years ago there was only one auction house in SA selling SA art in Johannesburg and Cape Town and producing a catalogue illustrating the lots on sale. Now there are nine such auction houses.

Hundt advises those considering art first to acquire some knowledge of the subject. It is actually quite a pleasant and rewarding task to visit galleries, to devour art books and to exchange ideas with the cognoscenti before buying.

One can follow established stars or, once one has an eye for quality, try to spot a rising star who will get the nod of connoisseurs in the future.

“Look at the producer’s pedigree, his commitment and versatility. Is he recognised by peers and institutions that matter? Look at the catalogues, read the articles.”

It might be safer to invest in established names. Buying contemporary artists, he says, is like going into the AltX market. That said, Hundt says young SA artists have an edge that you don’t find in Europe. Hundt says you must have a strategy and look for the right work at the right price. The state of the work is important. A small scratch can render a work by a famous artist a lot less valuable.

Hundt has a fine arts degree from Wits and has been in art all his life. When he was curator for the Oliewenhuis Art Museum in Bloemfontein he bought 15 paintings for R10 000. Today they are worth millions. At SPI he helps clients to value works and advises them on their purchases. He charges an hourly rate for his services.

Hundt warns beginners against simply buying what they like. Avoid what he calls “saccharine nostalgia”. That chocolate box of idealised Cape mountains with sunbeams, or quaint little fishing villages with boats, has probably been replicated many times is of doubtful value.

Avoid anything that is churned out like the curios at the side of the road in William Nicol Drive. He advises beginners to visit the serious art galleries in Pretoria, Johannesburg and Cape Town.

“Whoever produced it, the work must be of high quality and in good condition.

“There are many subjective aspects. People talk about taste and say beauty is in the eye of the beholder. But an investor has to take into account the consensus on what is good. Our visual literacy has declined because of TV, which serves up a conveyor belt of visual garbage. We have become insensitive to visual imagery.

“People don’t look carefully and just expect to recognise immediately the meaning of artwork and when they are confronted with something that isn’t instantly comprehensible they summarily reject it as not being art. 

“With such a limited vocabulary of vision how on earth can anyone hope to make a good decision when all they want is what they like? One final caution - just because it’s expensive doesn’t make it good either.”