The upside of art investment during a pandemic

Susie Goodman during a Strauss & Co auction. (Supplied)
Susie Goodman during a Strauss & Co auction. (Supplied)
  • The coronavirus pandemic has not halted investment in art.
  • Art collectors have seemingly made an effortless transition to the new digital "normal", says a director at Strauss & Co.
  • Yet, as with all assets, risk management of an art portfolio remains vital, cautions an expert at Stonehage Fleming Art Management.

Art collectors have seemingly made an effortless transition to the digital "new normal" brought about by the coronavirus pandemic.

Art galleries and artists have not been spared the negative impact of the coronavirus pandemic. Lockdowns, travel restrictions and social distancing have meant that the way art is bought and sold has adapted to a new hybrid model, which includes online selling and virtual marketing, as part of the "new normal" investing in art.

Sotheby's pioneered with a hybrid "clicks and bricks" auction at the end of June, with total sales of $363.2 million. Earlier this month Christie's debuted its live-streamed auction, which led to total art sales worth $451.8 million - indicating the art market can still, apparently, thrive despite the pandemic.

According to Susie Goodman, executive director of Strauss & Co, art collectors are using the mandatory slowdown to do online research and to engage virtually.

"In the past few months, as time-honoured routines have been upended by the Covid-19 pandemic, Strauss & Co made the decision to pivot to a hybrid model of live online selling and virtual marketing," says Goodman.

This strategic move has significantly grown its client base, both nationally and internationally.

"We've seen both established collectors and new buyers mitigate the effects of the economic downturn by diversifying their investment portfolios to include brand-name artists with a proven record at auction," says Goodman.

"International buyers interested in South African art have benefited from the significant depreciation of the rand since March. Our robust trade during lockdown has also produced knock-on effects downstream."

She has anecdotally heard of collectors using Strauss & Co sales as benchmarks for purchasing editioned artworks still available in the primary market, through galleries and studios.

Steve Kettle, a partner at Stonehage Fleming Investment Management UK, says that during times of crisis, the appeal of collectible assets like art can intensify.

"Each crisis is different and, therefore, the impact on art prices varies. Works of the highest quality unsurprisingly always perform best, but works of lesser quality or fashionable contemporary works that perhaps enjoyed a market in better times, will now struggle," says Kettle.

Historically, average valuations across the art market have tended to move upwards over the long term. In the short term, however, it all depends on demand. This is influenced by economic prosperity and the fortunes of those with the means to become significant owners.

Nervous of the present risks in investment markets, investors may look to include assets with a more consistent store of value in their portfolios.

"The current crisis is accompanied by low interest rates which could assist the art market in the shorter term but the crisis comes after an extended period - two decades - of price rises for art and, Covid-19 aside, the art market was looking for an excuse to reassess prices, especially for the contemporary market," says Kettle.

"As always, weak markets are unattractive to sellers of quality works and access to the very best works can, ironically, become more difficult at such times. The owners also prize their store of value at such times."

Risk management

As with all assets, risk management to preserve and grow the value of an art portfolio is vital, says Maria de Peverelli, executive chair of Stonehage Fleming Art Management.

Economic, political and legislative changes can all have a significant impact on the value of and sale opportunities for an art collection. They can also affect the costs and logistics of moving works from one country to another, sometimes required at short notice.

Changes imposed by international money laundering directives, for example, will bring increased scrutiny on collectors' activities.

"Collectors should also be aware of the inheritance or succession laws in different jurisdictions. They may restrict their freedom to bequeath their collection to a museum or establish their own foundation," says De Peverelli.

Authenticity

In a world of ever-increasing fraud, authenticity poses a risk to the value of an art collection. Understanding what you're actually buying, inheriting or receiving as a gift is just as crucial as knowing the parties in a transaction."

The same is true when a work has been transferred several times between trusts, companies or other entities controlled within a high net worth family.

"When it comes to transactions, the art market is largely self-regulated. Those rules that do exist vary from country to country, auction house to auction house, dealer to dealer and adviser to adviser," cautions De Peverelli.

"The lack of any recognised international standards for proving ownership, provenance, attribution, condition or even the parameters for technical analysis, all enhance the risk of acquiring a work which is not what it purports to be, or one with a tainted provenance."

Collaboration

South African company Aspire Art Auctions and the French auction house Piasa recently collaborated for a second time to present a large-scale auction of modern and contemporary African art - this time in Paris.

More than 170 artworks by 85 artists from 19 African countries that went under the hammer. The auction was hosted in the new hybrid format, with live in the room, telephone and live streamed virtual components, as well as using various auction platforms for real time online bidding - seen as the "new normal" for auctions going forward.

The auction took place in June, and, according to the company, although the fallout of Covid-19 has resulted in extraordinary social and economic changes and challenges, the auction demonstrates how the art market is adapting. That, despite difficulties, the art market remains robust.

"Although the bullish prices that have peppered the market on occasion have declined, the sale's sturdy results indicate a healthy market holding steady," states a report on the auction.

"Moreover, it demonstrates that art trading has resumed successfully, and that borders reopening and restrictions being relaxed globally bodes well for the future of the market."

During the auction, William Kentridge's 1989 drawing Soho Eating sold for €234 000 (about R4.9 million). Another mixed media work by Kentridge, Electrical Industries (Rodchenko), Alphabet Coloré sold for €18 200, almost three times its high estimate.

Ugandan artist Joseph Ntensibe's large-scale depiction of tropical greenery sold for more than double its high estimate at €67 600, the second highest price achieved at auction for this artist. An Irma Stern 1943 portrait of Dora Sowden achieved €182 000, while an early bronze sculpture by Edoardo Villa reached €54 600.

Cape Town painter Adrienne Silva says she is experiencing that art collectors are "investing" in themselves. She has sold three major works during lockdown and it felt related to the collectors not being able to travel to their proposed destinations.

"They were already established collectors, so I had personal contact with them - the sales were not through a gallerist. The galleries were largely closed, or exhibitions are virtual. The collectors contacted me. I did not advertise, she says.

"A series I started in 2018, titled Doctor Prescribes Armchair Travelling, and Travel Light, seems to have been a precursor to this period of time and reflects my thinking and painting practice."

Stellenbosch artist Portchie says within the first three days of creating an online art exhibition during lockdown, 88% of his work on show were sold.

"This inspired me as I received many orders from all over the world. It is very exciting," he says.

He is now working on a new Spring online exhibition.

"When it comes to art, you never know who the audience will be and what they will make with what you show them. I just live according to the motto of Andy Warhol who said 'you just make art, let other people decide if it is good or bad art and while they are deciding, you just make more art'," says Portchie.

"The market is never wrong. They decide what they like and what not. In these times where people are more at home, maybe they also want to create a space where they can experience some sort of normality."

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