There is a difference between investment and speculation in art. Speculation is about the hunt for the next Damien Hirst. It involves looking into the shop window – meeting dealers and attending sales to find an artist that will, with luck, excel in the next generation, and for which you are now paying a nominal price. To pull this off as a private investor is even less predictable than betting on horses. But it’s fun. Where the game is provably effective is to approach art like any other asset class – to find talent that is devalued. And there are some cracking opportunities. It takes only a modicum of intelligence, to realise that because of the anti-brown furniture syndrome in contemporary design, there are now thrillingly discounted chances to buy works of nineteenth century brilliance in British portraiture, landscapes and still-lives. Substantial painting by proven masters are changing hands for the same price as one polka dot by Hirst.
Philip Mould is an art dealer specialising in British art and Old Masters.
While you do occasionally hear how a handful of experts and lucky punters have made significant returns from investing in fine art, the illiquidity inherent in this asset class can make realising profits or avoiding losses very difficult. Not only is it extremely tricky to assess the exact value of fine art, but valuations are highly subject to changes in taste – investments in modern art are a good example. This means you could potentially be stuck in an investment for a very long time, all the while paying expensive storage and insurance fees. Additionally, investing in fine art generally requires a large initial outlay – which not everyone may have – and you will most likely be competing with more knowledgeable buyers. All this makes fine art an incredibly risky and opaque investment.
Emanuil Halicioglu is an equity analyst at Growth Equities & Company Research.