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Author: Stefan Hundt |

02 May 2012 14:48

Art as a safe haven for international money

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Investment-grade art outperformed S&P 500 and FTSE All Share

April/May 2012: The South African art market is in constant flux. The past few years have been particularly exciting as we have found our own niche in the global art world, not only on the auction stage with the regular South African Sale at Bonhams in London, but also in the contemporary art world with an “official” exhibition at  the Venice Biennale last year. Irrespective of the questionable nature of how we got to Venice, representation in this international visual arts arena is critical for the success of South Africa’s artists into the future.

For the serious art collector, the recognition of South African artist’s worth, exemplified by the record prices achieved in places in the last two years, despite economic contraction and recession, is but the cherry on the cake in terms of recognition of the underlying pool of talent and quality of vision that this country continues to foster.

There is little doubt art has become a seriously investible commodity that should enjoy the same serious consideration as any other investment-grade asset class. In a recent Financial Times article, art was identified alongside prime property as a relative safe haven for international money. The Mei Moses World Art Index reported that investment-grade art grew 10.2% in value in 2011, outperforming both the S&P 500 and the FTSE All Share total return indices.

South Africa is nothing like Europe or the United States in history or scale when it comes to art, and these reports, although encouraging, are not necessarily reflective of what is going on here. Nevertheless, they do provide a backdrop against which the expanding South African art market can be viewed as credible and growing.

The first quarter of this year is over and the South African art market has experienced something of a rollercoaster ride, certainly at the auctions. Despite some disappointing results for certain artists’ work, the demand for good quality South African works remains healthy. There is little doubt the last two years saw pressure on prices to the extent that the last quarter is still down compared with the previous quarter.

The Citadel Art Price Index may present a bleak picture to buyers who only seek monetary return on their art investment. The downward trend appears overall and for those who bought at the top end of the previous auction season this appears pessimistic. A closer look at what sold or not would present a more sobering picture; investors would perhaps find some encouragement if they retained their focus on quality rather than follow the herd of speculators as it rumbles along seemingly desperate to see new record prices.

At all the auctions held this quarter it was overwhelmingly good quality works which retained or even improved on the previous quarter’s prices, with a record or two being set by exceptional pieces. For many of the well-traded artists, such as Boonzaier, WH Coetzer and to some extent JH Pierneef, prices demonstrated a particular stickiness with some good quality works not finding buyers at the price levels demanded. There is no reason to conclude this indicates a downturn in the market, rather it would seem there has been a shift towards the more contemporary side.

This is not dissimilar to what has transpired elsewhere in the world, where contemporary and modernist art sales still attract the most attention and have shown some of the greatest gains. Volatility is ever-present in these auction categories and the past quarter’s sales have demonstrated this amply. The next quarter promises to be equally interesting among the auction houses with some exceptional items on offer.

Every artwork is unique and in this respect art cannot be compared with many of the other investment asset classes in the investment universe, other than perhaps prime real estate. Artworks do provide benefits to the owner. Although these may be difficult to quantify, they are clearly tangible and often outweigh monetary considerations. A world without art would be impossible to contemplate and it is rare that even the most humble home doesn’t have some aspiration to have artworks on the wall.

The art market is not without its fashion episodes and marketing stratagems which may inflate prices beyond expectations. Thorough research and expert insight provide the tool that makes for better choices when buying art, and thus changing what would have been a sentimental decoration into an investment with significant meaning.

Whether you are a serious collector, or only able to afford a limited amount towards acquiring an artwork, an informed choice is what differentiates between the piece which remains exemplary of the popular taste of the day and that which transcends its origins to be a meaningful experience for a viewer in time to come.

*Stefan Hundt is head of Sanlam Private Investments Art Advisory Service

Topics: art, South African art market,

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