The joy of art investment

As far as investments go, 2013 continues to be about the new muscle. Alternative investments, always on the periphery, in spite of its ability to deliver consistently reliable results, have now entered front stage. It is any wonder it took so long.
Fine art has always been a pleasurable investment for aficionados; a tangible object of beauty that has historically excelled in both financial and aesthetic value. However, post-recession, the acquisition of such works of art has piqued the interest of traditional investors more at home trading stocks, bonds and cash.
The result has therefore been rather spectacular, with total sales of arts in 2012 alone hitting $9 billion (approximately £5.57 billion), and expected to tip over into £10 billion (£6.2 billion) once all the figures have been properly calculated.
How so, against such disquiet in the fortunes of the global economy – the pandemonium of the eurozone and the erratic financial direction of the US as two obvious cases in points – has the art market thrived?
It is all about numbers. The traditional art investor demographic has opened up to include otherwise savvy but immobilised players, who have for a long time now been unable to use their knowledge, skills and expertise in their traditional sphere of influence with the kind of gusto they have been used to.
Let’s return briefly to last year. While it may fall ever so slightly short of 2011’s figure of $11.8 billion (£7.3 billion), it is on course to trump 2010’s total of $9.5 billion (£5.9 billion), which was in itself, sales aside, a milestone year for art.
There was, at the time, a number of records made at auction, which indicated that there was plenty of confidence in art as an investment, and more so, suggested that the once cautious rich were happily spending again.
And there were more of them. A report at the time, from Capgemini SA and Merrill Lynch & Co, recorded that the number of millionaires was on the up across the world and had, since 2009, grown by an incredible 17 per cent.
While they may have optioned to pump their money in traditional investments, things were, as we now understand, irrevocably different. The fortunes of that market remained uncertain, as it still does. Art however, well, something glimmered, and thus a new vigour entered the market.
“The art world is inundated with money—there’s so much liquidity out there because people are afraid of currency,” the New York-based Old Master art dealer Richard Feigen told The Art Newspaper in 2010. “They’ve been told that art is a place to park cash.”
Art thrives because it almost exists in a world of its own, protected though by no means immune, from fluctuations in currencies and increases in inflation. But, with reference to the last point, is it “a hedge against inflation”?
“Based on the past two decades, absolutely, 100 per cent yes,” the art advisor Todd Levin, of the Levin Art Group, told The Art Newspaper three years ago. But, it’s not so black and white, he further explained:
“For the average collector, it depends on whether one is inside the system or not. If one understands how the system works, then yes, it can be a great hedge. If not, then the answer is – at best – maybe.”
The art market has shown that whatever hesitation might have informed Mr Levin’s reasonable deduction is negligible…to a degree. That it might not be a good bet for those not so au fait about the industry is correct to a point, but such high stakes are not made whimsically and done so on counsel. As such, 2013 will be a very good year for all those who partake in a spot of buying.
Cadogan Tate has extensive experience in shipping fine art all over the world.