Gulfnews: Art and the alternative emerging market

http://archive.gulfnews.com/business/Investment/10118318.html

04/14/2007 08:51 PM |
By Sean Kelleher, Special to Gulf News

Equity connoisseurs will be familiar with the excitement generated by the emerging Bric market (Brazil, Russia, India and China) - countries with huge populations, ancient cultures and a fast-growing wealth culture.

With that backdrop, it doesn't take a great deal of imagination for wealth connoisseurs to picture Christie's view of the future growth of an "emerging art world".

Part of that picture, according to William Lawrie, a specialist in Islamic, Arab and Indian Art with Christie's, is an "emerging art market" featuring Russia, China, India and the Middle East. Christie's investment into this futuristic picture is already underway as evidenced by their first two Dubai auctions which produced $17.3 million of sales. Intriguingly, the first auction produced $2.2 million of Middle Eastern sales, rising to $ 4.1 million at the second sitting.

A trend or a spike for Middle Eastern art? "Too early to say," says Lawrie, "I would normally want to see four or five auctions take place over about a year or so before we realistically determine a trend." For now though, interest in the first two auctions suggests that there already is a local market of some sort. The question for Christie's is: how valuable is it?

The question for local wealth enthusiasts will be: is this "emerging art world" a serious asset class? Perhaps we need a few more auctions to answer that. In the meantime, the prospect of making money out of art is likely to attract the attention of more philistine investors. You don't need to be cultured to understand making money.

Checklist

So for uncouth investors (like the author) the following checklist might help in understanding the financial value of any work of art. From the beginning though, Lawrie points out that it rarely makes sense to buy the cheap one. Lawrie believes that, given a choice of three pieces from the same artist, you should buy the best one - likely the more expensive one. The more valuable piece is the rarer one and therefore more likely to appreciate in value. Thinking cheap might not work as well with art as in fungible commodities.

Back to the checklist which should include: rarity, beauty, the artist, the condition, and "provenance". The latter heading refers to the history of the piece, the list of previous owners, the collections it has featured in, its documentation, and so on.

This implies that there can be "good provenance" and "bad provenance". Lawrie and Christie's of course deal with the "good" end of the market, showing little interest in my query on what happened to the stolen Munch from Norway. Yet Lawrie's response is an insight into the two tiers of liquidity in the art market: tier one, the auction; tier two, the dealer. Apply the word shady to the latter and you generate pictures of Sean Connery rappelling down ropes to nab a masterpiece. Like any other asset class, art has its dark side.

Like any other asset class though, it's not the dark side that causes the greatest losses. It's the investor who buys high and sells low. So the use of professional expertise is critical to the philistine.

To Lawrie again for advice, and, significantly, he points to the "art hierarchy". "You are better off buying a grade three painting from a grade one artist, than a grade one painting from a grade three artist," says Lawrie. A line of thinking first exploited by Giorgio Vasari, an Italian who started a sort of Seria A league featuring Donatello, Michelangelo and Leonardo. If you are holding pictures of contemporaries to these guys, the chances are that they are less valuable, especially if they haven't solicited the critical acclaim.

"The more ink spilled on an artist, the higher the value in general," says Lawrie. Suggesting that approaching an expert and being sure of the artist's "ranking" is one way of helping asses the price of a given work.

Expertise

For the author, expertise and guidance was certainly a requirement in looking through the catalogue for Christie's second Dubai auction. That auction contained "lots" ranging from $4,000 to over $200,000. Stand-outs for me included Nasser Ovissi's (Iran) "Afternoon Rest" positioned in the catalogue for $25,000 to $35,000, and the work of India's Jamini Roy (starting at $8,000). But then I'm a philistine.

Pushed on the significant Arab works, Lawrie's examples included the UAE's Abdul Kadir Al Raes whose "yesteryear" sold way over the catalogue listing and well into six figures which might get him noticed; and Paul Guiragossian's "Autour de Enfant", who Lawrie named as one of the stars of the second auction.

Preferences will of course change from viewer to viewer, but the one thing that the Christie's auctions are likely to provide is a fairly eclectic mix of works from Arab, Indian and Iranian markets, according to Lawrie, a feature that distinguishes Dubai auctions from other, more domestically orientated, Arab auctions and shows. "In addition", says Lawrie, "the UAE is likely to auction newer works, which, by definition are less rare".

By implication, then, perhaps the UAE will sprout an art market that allows investors and collectors in at a lower cost level, getting them into the art habit early, and profiting from growing a collection over a period of time. Time, of course, will tell.

-The writer is Chairman of Mondial/Financial Partners International.