Art provides ideal investment vehicle for portfolio diversity

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Ideas & Debate

Art provides ideal investment vehicle for portfolio diversity

A woman studies a lego sculpture of a tiger by brick artist Nathan Sawaya during The Art of The Brick exhibit at the California Science Center, in Los Angeles on April 22, 2021. PHOTO | AFP

Summary

  • For investors as well collectors looking at disappointments on the stock market and the low interest their money is now making in the bank, art presents an interesting investment avenue.

When the public sits and notices the art market, it is usually when an anonymous buyer pays a mind-boggling sum to acquire a prized painting or sculpture.

In 2020, global sales of art and antiques reached an estimated Sh5 trillion according to the Art Market 2021 report by Art Basel and UBS. As expected, America, the UK, and Greater China, continue to account for a majority of global sales by value in 2020, at 82 percent. Perhaps most notable, Francis Bacon’s ‘’triptych” sold for a record Sh8.45 billion last year.

While these numbers are attention-grabbing, there’s also a robust market at much lower prices. According to Citi, works under Sh5 million actually offer the best performing price point from both a return and a risk per unit of return basis.

In other words, there is no disadvantage from a return perspective to having a small purse.

Now, this is a good point for the emerging African collector and ordinary investor seeking alternative investments.

Works sold for less than Sh5 million accounted for 92 percent of the total number of works transacted and 12 percent of the market’s value (stable in 2019) according to the Art Market report.

The majority of works sold (67 percent) were for prices below Sh500,000, although these made up just two percent of sales values.

But is art a good investment? Yes, but before you even think about putting down money, it’s important to educate yourself on the forces affecting the art market overall, and the niche you’re hoping to pursue.

Nonetheless, art is ideal for investors interested in diversifying their portfolio since its performance isn’t correlated with any of the other major asset classes.

For investors as well collectors looking at disappointments on the stock market and the low interest their money is now making in the bank, art presents an interesting investment avenue.

And is there a future for African art? Yes. Last year, Kenyan-based Circle Art Gallery managed to sell about Sh15 million worth of art with 95 percent of lots sold.

In 2019, the Modern and Contemporary Art Auction East Africa topped Sh30 million in total auction sales with 90 percent of the 59 lots sold. Furthermore, museums in Europe and North America have hosted an unprecedented number of shows of African art in recent years, while art fairs dedicated to the field have sprung up worldwide.

In 2017, Sotheby’s, one of the largest art auction houses in the world, introduced its first dedicated contemporary African art sale due to increasing demand from African collectors.

Ask collectors

That said, start with research. Go to the galleries and ask questions. Get involved with the artists and befriend curators.

Consult with collectors and art critics. Begin with the established outlets; Banana Hill Art Gallery, The GoDown Arts Centre, Red Hill Art Gallery, The Art Space Gallery, just to name a few.

Remember an educated consumer is going to be best equipped to maneuver in this marketplace.

Ultimately, be sure to buy what you like. That way, if your still-life painting fails to appreciate in value, you can still appreciate its contribution to your wall.

Mr Mwanyasi is the managing director at Canaan Capital