Value of art paints a rich and varied canvas for investors
The Investec Cape Town Art Fair invited our art advisory in February to moderate a talk about investing in art and the returns collectors can expect.
The panellists, who included the founder of Artnaka, a London-based members club focused on contemporary African art; the CEO of Business and Arts SA (Basa) and the joint head of Wealth and Investments at Investec Cape Town, engaged in a stimulating conversation to explore the wide-ranging rewards that can be associated with investments in art. The discussion was particularly centred on contemporary African art and the continent.
Investing in art is about investing in value. It is about investing in the potential of artists and the potential of artworks. Art has dual values: a financial one from which collectors can make healthy profits when they buy right, and an intangible one. The latter generally refers to the aesthetic value. Cultural economists have coined the term psychic returns to describe the aesthetic pleasures that can be derived from art.
There is indeed much value in having a great piece of art at home to look at, but there is more to it. Art has a unique ability to create value or capital, economical and non-economical. It can be the source of many intangible benefits. Art can be described as a relationship asset.
Collectors place much value in sharing their passion with others and developing friendships with like-minded art lovers along the way.
The latest annual Deloitte Art & Finance report found that 63% of major art collectors and 85% of art professionals surveyed confirmed that the social aspect of collecting art was a key motivator.
It is about participating in what musician Brian Eno has coined the scenius, the talent of a whole cultural scene as opposed to the genius of an individual. Contemporary African art has in recent years grown into a vibrant scenius, with many artists producing great art and collecting from one another, with collectors putting money into the scene and with many social events and commercial entities dedicated to it.
On a personal level, art is a universal experience, the same as music. It has the power to transcend gender, race and class. It can help people express themselves and connect with others. It talks about narrative, identity and heritage.
There are collectors who may share their passion for art with their family with longterm returns such as the creation of a worthwhile legacy that can be continued by and for future generations.
Art can foster meaningful relationships, whether social or intimate, that are truly priceless. In this sense, it has the capacity to generate relational capital.
On a macro level, art is able to produce cultural and brand capital too, and thus act as an economic driver while preserving heritage. The British-Nigerian artist Yinka Shonibare is quoted saying: “Governments in Africa are yet to appreciate the transformative power of art on economies.”
He gives the example of the Guggenheim museum that opened in Bilbao, northern Spain, in 1997 and has since transformed the city into a leading tourist destination. The museum now generates €400m annually.
Shonibare says that African governments should take their cue from the so-called Bilbao effect to optimise the value of contemporary African art.
The transformative power of art can also be seen in business. Basa has developed the concept of the shared value cycle. It follows where the money for investments in the arts come from in business organisations. The budgets may come from marketing, and businesses can get a lot out of aligning themselves with the arts. The budgets may come from corporate social responsibility, which focuses on the positive impact of art on communities.
But arts budgets mostly originate from human resources. This is because business recognises that art has the power to change an organisation internally. It is a tool to effect wellness and transformation. And so it is that art is able to generate organisational capital too.
It is against this rich backdrop that the financial value of art should be understood. Art can produce relational, cultural and organisational capital, it can give psychic returns and it can bring about economic value too.
Of course, it is important to buy right, and financial experts advise collectors to consult with professionals who have experience. From an asset point of view, the main benefit of collecting art may be portfolio diversification. It is now widely accepted that art can create a hedge against currency fluctuation.
The beauty for collectors is that there is no minimum amount required. There are artworks priced for everyone and a collection can start anywhere. As for the greatest reward of all, it is probably to enjoy the journey itself of collecting art.
Walker is a partner at Walker Scott, which offers end-to-end art management services. www.walkerscott.co.za