How to invest in art

Susie Goodman General manager for Strauss & Co in Johannesburg
Susie Goodman General manager for Strauss & Co in Johannesburg

$450m. The record amount for which Salvator Mundi, the long-lost Leonardo da Vinci painting of Jesus Christ, commissioned by King Louis XII of France around 1505, was sold at auction in New York in November last year.

For many the idea of paying that much for a painting seems ludicrous.

But a video titled The Last da Vinci: The World is Watching (see, illustrates the dilemma embedded in investing in art. 

It shows members of the public staring at Salvator Mundi with looks of awe, anguish, contemplation and joy, and some overcome with emotion.

Interacting with an artwork is a truly emotional experience. The art market can’t help but be a space where money meets emotion.

Aspire Art Auctions directors Mary-Jane Darroll and Ruarc Peffers say the most important maxim for any collector is the old favourite – “buy what you like”.

But they admit that investing in art is “often more complicated” than that. “The decision to buy can be influenced by it being solely aesthetic and personal, or it can be part of building an investment-driven portfolio of assets,” they say. “There might be a tension between those two agendas.”

Fred Scott from Walker Scott Art Advisory says people often overpay in the art market, which he calls the “aesthetic dividend” – the difference between market price and the price a collector will pay when they simply have to have the artwork.

“The art market goes up and down, similar to the stock exchange,” says Scott. “It is important to watch the trends that define collector purchases.”

Global indexes help collectors monitor trends that can inform investment decisions.

Darroll and Peffers say various “data-rich platforms” can be consulted to better understand and guide investment decisions. These include online sources such as Auction Vault, Blouin, ArtInfo and Artsy.

Want to invest?

Alastair Meredith, art specialist for auction house Strauss & Co
, warns that “not all artists go up”. He therefore recommends that investors purchase art pieces that they love so that they can live with it and enjoy it.

“Sure, there are smart ways to invest in art, but then one needs to educate oneself,” he says.

Susie Goodman, the Johannesburg general manager for Strauss & Co
, says the South African art market is small and easy to navigate.

The “primary market” is where galleries operate, explains Meredith. Galleries find artists, promote and sell their work. The “secondary market” is where auction houses like Strauss & Co operate. “We deal less with artists and more with collectors and buyers.”

The primary market is less transparent than the secondary, he says, with auction houses publishing the results of all transactions. Only when an artist’s work starts trading on the secondary market can collectors and investors get a sense of a market value for that artist.

Darroll and Peffers say local artists are “accessible” and a good source of information about their work and the market.

“Galleries, dealers and academic experts can also be consulted,” they say. “Information on the auction market specifically should also be perused to learn how the artist is selling in the secondary market, and how this might relate to their value in the primary market.”
What to consider when investing in art
Many remain skeptical about art as an investment, but Scott points out that the global art market grew from R140bn in 2000 to R700bn today.

“People say you can’t quantify the value of an artwork; that beauty is in the eye of the beholder,” says Scott. “But you certainly can qualify what is a good artwork and what is a poor artwork.”

The key, insists Scott, is developing the buyer’s eye and getting good advice. “Selecting the correct artist is key.”

Knowing the history or “provenance” of the artwork is also key. This will protect you from buying a stolen or fake painting, says Scott.

Goodman suggests that potential art investors put in the work by going to gallery openings and auction previews, and speaking to gallery owners, curators and artists.

“The more you see, the more you develop your eye,” she says. “Looking is the key thing.”

New collectors and investors must understand that there is a value-based hierarchy of media in the secondary market, and to an extent in the art world generally, say Darroll and Peffers.

“For example, oil on canvas is more desirable than pen and ink works on paper,” they say. “There is also a difference in value between unique works and works that have multiple editions.

“If you are looking to invest in a particular artist’s work, or if you simply like an artist’s work, find out about them. Do they have a gallery, a dealer, and what reputation? Where do they exhibit, and which other collectors and collections have bought the artist’s work.

If their work features in private, corporate, institutional and public collections, then this adds to their investment value.”

Makgati Molebatsi of Mak’dct Art Advisory says key considerations are the artist’s execution, technique, subject matter and the stage in their career they are at. “Don’t look at early-career artists as you don’t know where they will be in six years’ time.”


The local art market
Chris Barnard, the man behind the Pa Kua store and the Barnard Gallery in Cape Town, says the local art market is doing very well and has seen a massive increase over the last decade, with a number of high-quality artists coming to the fore.

In 2016, an Alexis Preller sold for over R7m, in 2017 a Pierneef sold for over R4.5m, a William Kentridge drawing for R5m and a Sydney Kumalo sculpture for almost R2m.

According to Mary-Jane Darroll and Ruarc Peffers, directors of Aspire Art Auctions, savvy investors can currently pick up real bargains.

“In general, the market locally is healthy, with new galleries and permanently housed collections opening up,” they say. “If we segment the market, there is still really strong performance at the top end for both South African and international work.

In the middle part of the market there is more risk-aversion given the general state of the local economy.” For the investor this means there are currently “bargains to be had”.

Art consultant Matthew Krouse says in the last three to five years SA art has consolidated itself within the context of African contemporary art. In 1997, when the Second Johannesburg Biennale took place, SA art found itself “a place apart, looking to the west”.

In 2017 it finds itself “firmly entrenched” in the African continent, he says.

Makgati Molebatsi of Mak’dct Art Advisory says there is a lot of interest in SA art and artists. Events based around art, such as art fairs, are increasing, have become social events and have boosted the profile of art in the country.

She says art fairs are a place to go look at art without feeling intimidated. “Galleries can be intimidating spaces.”

But according to Strauss & Co’s Alastair Meredith even art fairs can be intimidating, with many galleries choosing not to price the works on display, which chimes with the elitist retort, “if you need to ask, it’s too expensive for you”.

Susie Goodman from Strauss & Co says the Turbine Art Fair, where no work was sold for more than R50 000, was a far less intimidating space. “Thirteen thousand people came and a lot of them were there to learn,” she says.


Tips for investors

Investor guidance from Mary-Jane Darroll and Ruarc Peffers, directors of Aspire Art Auctions:

Low range [R5 000 to R20 000]
The lower end of the market is opening up. Aspire has seen works by the likes of Sam Nhlengethwa, Andrew Tshabangu and other contemporary artists do well in this range.

Mid-range [R20 000 to R100 000]

Keep a collector’s eye out for more traditional works, with mid-range prices for Errol Boyley and Adriaan Boshoff making acquisitions worthwhile.

High range [R100 000+]

There is value to be had on auction from contemporary artists like Diane Victor, Pierre Fouché and Mustafa Maluka. Cape artist Peter Clarke, who died in 2014 and is perhaps less well-known than the likes of Pierneef, Irma Stern and William Kentridge, continues to do well at the higher end.

Then there are artists like exiled South African Louis Maqhubela.

Contemporary artists like Athi-Patra Ruga and Mohau Modisakeng are both doing well in the primary market and have started to perform on auction too.

This article originally appeared in the 14 December – 17 January edition of finweek. Buy and download the magazine here.

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