Alternative investment: art

I was at Art Gallery Week in Hong-Kong late last year. The whole of the Hong-Kong art scene was busy with openings, private viewings and other glamorous or edgy events such as the now famous “battle of the artists”, also known as gladiators with brushes !
Sheung Wan – the bohemian up-and-coming west Hong Kong neighbourhood – was bustling with people, laughter and an endless flow of champagne.

Art is definitely in fashion. It is slowly but surely becoming the most prominent of the Swag (silver, wine, art and gold) assets – sorry gold, but you have to clean up your act. No more frantic plunges please.

Christie’s Francis Bacon’s Lucian Freud triptych went for $142m, in November, smashing last year’s auction record set by Edvard Munch’s Scream by an impressive 15%. This was quickly followed by a record sale at Sotheby’s – Andy Warhol’s Silver car crash, Double Disaster, closing at $105m, another record for the iconic artist. Every auction is now eagerly anticipated and scrutinised for the next record sale. As a well-trained finance person, I started to look for triggering events, or changes in the fundamental dynamics of what we talked about in the past year or so when it comes to alternative investments:

• Demand: has it changed suddenly? Not really. 
• Supply: has this changed suddenly? Not really.
• Rarity: has anything changed in the artist’s agenda? Not really – they have all been dead for decades.

Are we reaching a pivotal time in the art market? Could modern and contemporary arts be taking a path of their own? Are we witnessing the emergence of a new asset class in the Swag world, a micro-niche, leading to a micro-bubble? There seems to be no explanation.

“It is what it is,” says a prominent London-based art broker. “It is completely irrational – the perception of economy being a bit better, or the sudden reali-sation that some pieces have a mas-sive value potential and have to be grasped now? Everyone in the industry is a bit puzzled and waiting for the next auction to confirm the trend.”

Laurens Kasteleijn, an art professional working in Shanghai, Beijing and Hong Kong for the past six years, says: “This does not seem to be coming from Asian buyers. Here in Hong Kong we tend to see an opposite trend – Asian art buyers are becoming more mature and sophisticated art collectors, turning to local modern and contemporary artists. Their taste is changing quite fast.”

When logic fails, there is only one way to go – philosophy or belief. Art is a secular way to express feelings, to capture something of the zeitgeist. Art is yet another product of the environment, and just like leadership, it has to resonate with the times in which we are living. A closer look at what types of pieces have broken auctions records in the past few years reveals a man screaming, a distorted person, a piece called Double Disaster. They all allude to something current, or modern. They are about pain, fear, change, chaos and uncertainty.

When I look at these pieces, I see the world as we know it today. I see a world in a state of flux, convulsing, a dying world giving birth, waiting for another to emerge.

This is how I choose to explain the irrational, what I choose to believe. For-get about financial aspects and hard-core rationality. Forget about current global trends, looking for real assets, going back to fundamentals and real finance. Forget the contrarians who are a dime a dozen – the mantra “buy cheap and sell high”, the struggle between long-term sustainable yield and fast high multiples.

Go back to the beginning.

These pieces sold because they have impact, they tell a story, and that story resonates with the human beings we are.