Making the art world part of your portfolio
The art world is getting even busier. I recently attended one of the most popular art fairs, Frieze, which debuted contemporary works in Los Angeles recently. The best pieces were bought by local celebs, collectors, and gallerists on the first night, invite/super-VIP entry only. A work by Mark Grotjahn was notably sold for $600k and of other pieces by Henry Taylor and Avery Singer sold in a price range of $100k-495k.^1 A collection of former UBS head-banker was presented that included Picasso’s “Femme au beret et la collerette” and it’s not clear which pieces were sold during the event. Understandably, most blue chip works are outside of the price range of most investors. So how do you determine what kind of collector you want to be and how do you incorporate it in your portfolio?
Artwork, if part of an investment portfolio, should be treated as such. The most major collectors keep their purchases inside a secretive warehouse with security and A/C, for the sole purpose of selling it for a profit many years later. For most people, however, art is meant to be seen as it’s meant to enrich life, inspire, and create conversation and culture within society. You must determine what kind of collector you want to be and if the sole purpose is to turn a profit or to be part of something more meaningful.
According to a series of interviews by New York gallerist, Scott Kelly, collectors uniformly have a huge passion for art and a desire to meet people and be part of the conversation. More than just enjoying the art they purchase, they seemingly enjoy attending events, networking, and travelling to the next art scene. Defining your passion will help determine if you’ll be a successful collector.
Higher end, more expensive works, created by fashionable popular artists tend to get the best return on investment. This philosophy may not be so different from analyzing stocks and bonds, as performance is determined by the actions of collective investors who believe in the growth potential of a company, its mission, founders, and role in the marketplace and are willing to devote financial resources to that belief.
Regardless of the investment vehicle, it’s prudent to take care of your financial fundamentals first, including establishing a cash reserve, preparing for retirement, protecting against the unexpected, and so on. Once the underlying fundamentals are taken care of, your investment options can finally include highly illiquid, but potentially highly rewarding, art investments.
At Eureka Wealth Management, I’ll help you determine how much of the portfolio can be carved out for art. I also analyze retirement, broker insurances, and manage your normal investment portfolio. Call for a free, initial consultation at (760) 537-0791 or online at eurekawealthmanagement.com.
Sources:
^1 Financial Times, 2/22/2020, “Logging in to the fair”
Scott Kelly Gallery: https://www.skny.com/