2014 Astronomical Art Auctions

New Art Valuations

097441_2-lg20% Compound Returns ?

This fall’s fine art auctions in New York City set several new records including that for total sales which reached $2.3 billion, up from $2.2 billion in May and $1.8 billion a year ago. The fall art auctions which traditionally take place in the first two weeks in November, were led by Christie’s auction house sales totaling $1.2 billion, closely followed by Sotheby’s with $1.05 billion. Phillips auction house came in third.

Michael Moses, co- developer of Mei Moses Fine Art Index, identified perhaps the most significant and unique attributes of this season’s NYC auction sales:  “At the Christie’s postmodern and contemporary sale, the average compound return was 20 percent annualized.” [Emphasis added]

Christies Auction

Sotheby’s New York, Impressionist & Modern Art Evening Sale, 4 November 2014.

A related facet of the auctions noted by Deloitte is that fine art is no longer bought solely for the emotional gratification of collecting. Deloitte Luxembourg has identified a growing convergence of the art and finance worlds. Deloitte suggests that more wealth management firms will add to their services the ability to provide clients with ” management and planning, preservation, leverage and enhancement of art and collectible assets.”

Money published an insightful article [http://money.cnn.com/2013/11/06/investing/wealthy-investors-cash/] in November 2013 indicating the asset classes in which the wealthy were holding their money. The findings are illustrated in the chart below from Citi Private Bank which lumps art together with real estate, commodities etc. in the alternative investment category.

Average Allocation 1

New Asset Class

To an increasing number of very wealthy investors, fine art/collectibles is becoming its own asset class, joining stocks, bonds, money market instruments, real estate and commodities.  Due to the unique and innovative qualities of the most prized pieces, fine art assets are the antithesis of commodities. Therefore some investors buy art to further diversify their portfolios. Extrapolating from the Citi Private Bank chart there was and probably still is a lot of cash seeking a safe harbor. Highly prized fine art and collectibles are at least candidates for temporary anchorage.

In a 2014 survey, Deloitte Luxembourg found that the top four reasons identified for purchasing art are: Emotional Reasons=78 % [feeling connected to the piece] , Social Value=61% [moving in the wealthy art circle], Portfolio Diversification=37%, and Investment Returns=47%. When asked why they personally bought art, 76% responded for a “Combination of Collecting and Investing,” up from 53% in 2012.  See survey at:  http://www2.deloitte.com/lu/en/pages/art-finance/articles/art-finance-report.html

Art Auction

Generally postwar and contemporary works of artistic genius continue to show the greatest ROI. It is surprising that many of the pieces recently sold have been produced in the last 15 years, several in the last five years. Work’s commanding the highest price were generally representative of the artists highest level of creativity. At the Christie’s auction on November 12 , Andy Warhol’s Triple Elvis (Ferus Type) sold for $82 million. The work’s value has increased exponentially as it has become recognized by experts as impacting art history. For a full discussion of the new valuation of art see James Stuart’s brilliant New York Times Article  at http://www.dallasnews.com/business/personal-finance/headlines/20141201-with-art-investing-in-genius.ece

Auction Fall Triple Elvis Warhol

 

 

Risk Factors

While demand remains strong, Deloitte notes that there are four primary risk factors to the current fine art market: Speculation, Geo-Political Risks, Art Market Infrastructure Risk, Art Object -Specific Risks (Authenticity, Defective Title). For the art buying novice, the advice of an expert appraiser is always strongly recommended. Just recently a painter from East Hampton defrauded art collectors of $2.5 million. He sold them counterfeit art works of Jackson Pollack and other famous painters.

Counterfiet Jackson Pollack

As quoted by James Tarmy (in his recent important Bloomberg article linked below)…. “Works continue to do incredibly well,” said Christine Berry, a partner in the New York gallery Berry Campbell. “People talk about a bubble, but just look at the sales.” See: http://www.bloomberg.com/news/2014-11-14/collectors-buy-2-3-billion-of-art-in-two-weeks-in-n-y-.html

First, let’s hope Ms. Berry is able to say the same next year. Second, let’s trust but confirm.

The Sofia family has been serving New Yorkers for about 105 years. If clean secure neighborhood storage is important to you for your art, collectibles, household items, seasonal clothes and goods etc., call us at 212 873-3600.