More and more, the art world and the investment business are becoming intertwined, with even non-collectors taking art more seriously. I’m often asked about the different ways to invest in art, and the answer is becoming more complex. Most investors either buy art directly or invest in art funds. Or, there are collectors who are also activist investors, like hedge fund manager Dan Loeb. As of late, Loeb has become Sotheby’s largest shareholder through his Third Point hedge fund; he clearly sees art as an asset.
Loeb also sees Sotheby’s as an art business he can change. In a scathing open letter last week to Sotheby’s CEO William Ruprecht, Loeb said “Sotheby’s is like an old master painting in desperate need of restoration,” and asked Ruprecht to step down. As a prominent collector and powerful investor, Loeb has significant influence, though no one knows where his maneuvers will lead or how Sotheby’s stock will now perform.
I find the developments both fascinating and exciting – the attention that Loeb is drawing to the art world will only help strengthen the already strong art market. For my clients, I recommend buying art directly; you have control over what you buy, it’s less expensive and there’s more upside. And I continue to see new entrants in the market. As Melanie Gerlis pointed out recently in the Art Newspaper, art funds are struggling, however, she wrote, “One major change in investor behaviour has been a trend across all markets in favour of direct investment.” Collectors and non-collectors alike are both intrigued by the art headlines and helping to create them. In Artinfo last month, Eileen Kinsella reported that Christie’s and Sotheby’s “jumpstarted the fall auction season from September 25–27 with lively sales of contemporary art.” These sales target newer buyers and “are increasingly becoming a barometer of the health of the market and reflecting the robust activity at relatively lower five- and six-figure price points.”
In addition to these New York sales, China continues to impress. Despite what Loeb asserts, Sotheby’s latest evening sale in Hong Kong achieved over $145 million, more than double the prior record, including 11 world records. There is also a lot of anticipation for the big November sales in New York. The auction houses are starting to disclose their top lots, which include, amongst many others, two seminal Warhol paintings. Christie’s is selling a Coca-Cola bottle from 1962 with an estimate of $40 – $60 million, and Sotheby’s is selling a very large (8 ft. x 13 ft.) car crash with an estimate in excess of $60 million.
The private markets are also extremely active now. My clients choose private sales over public auctions when they don’t want to risk the uncertainty of buying or selling at auction or if they don’t want to wait for the right sale to come up. Not even August was quiet; I closed my biggest deal of the year, and September “back to school” was also quite busy. Waiting lists for sought-after artists at galleries are getting longer, and the time that galleries give collectors to make decisions is getting shorter. Prices for the right works are increasing rapidly, and those in the know refuse to miss out.
I spend a lot of time researching current trends in the art market and have helped a number of hedge fund investors find art for collecting and investing. I’d love to talk with you more about it as well.
For further reading:
Dan Loeb’s Open Letter to William Ruprecht
The Art Newspaper: Art Fund Industry Struggles to Emerge from the Gloom
Blouin Art Info: A Pair of Colorful Contemporary Auctions Show Fall Already Heating Up
10/9/13