Art market

Financiers lacking art knowledge are increasingly collecting art as investment, rather than out of passion

The Art Newspaper discusses the surrounding points of views


Miami Beach

“I’ve never seen so many people who are clearly speculating”, says one Los Angeles dealer showing at Art Basel/Miami Beach last month. “Whenever the name of one of my artists starts arousing some buzz, collectors begin calling me up and demanding anything available. It doesn’t really matter what the work itself is.”

The phenomenon is fuelled by the market track-records of many artists relatively unknown a few years back. New York collector Michael Hort, for example, was reportedly offered half a million dollars for a painting by Kai Althoff that he bought several years ago at $10,000. Similarly market-stoking, painters Marcel Dzama, Wilhelm Sasnal and Tal R drew strong bidding at New York’s November auctions. Sasnal in particular soared; estimated at $20,000-30,000, one painting reached $62,000 at Phillips de Pury, reflecting the near-impossibility of securing his work on the primary market. For Sasnal’s recent show at Zurich’s Hauser & Wirth, comprising seven paintings and three sculptures, there were more than 100 offers from eager clients.

Ivan Wirth, the gallery’s co-owner, uses a simple test: “When collectors ask about the artist by name without discussing the piece itself, that’s a reason to stop talking”, he explains. “Those are not real collectors; they’re private dealers building up inventory.”

Many of those seeking the next Althoff or Sasnal in Miami headed off to the Ice Palace Studios, home of the New Art Dealers Alliance (NADA) fair. Especially at booths offering work by anointed stars such as Assume Vivid Astro Focus, Christian Holstad, Dana Schutz, Robyn O’Neil and Hernan Bas, collectors were jostling each other to get work and scurrying around the fair’s tight aisles, making the scene reminiscent of the notoriously competitive action at the Barney’s sample sales in New York. “One collector explained to me that he sees the works of art in NADA as high-risk investments”, recalls Marisa Newman of Suite 106 gallery in New York, sounding mildly shocked at the bluntness. “But he said if you buy 10 of these artists, one will take off.”

Similarly, the action at Art Positions, aka the beach-front containers anchored at Collins Park, was hot and heavy, especially at the booth of Peres Projects, home to Assume Vivid Astro Focus and Matthew Greene, two of the market’s newest shining stars. And newness is a critical attribute.

“There is a sense of market euphoria, where everything labelled ‘young art’ seems to be selling, regardless of the risks attached”, says Anders Peterson, founder of London’s Art Tactic service, whose offerings include analyst-report-style evaluations of the market for various artists.

Not surprisingly, many of the people approaching the art world from a return-on-investment perspective hail from high finance.

“These new market players you see running around the fairs are usually in their early to mid-30s, with buckets of money from venture-capitalism deals or Wall Street bonuses”, says one prominent advisor. “They want to build a diversified portfolio but they don’t have any sort of art knowledge.”

Another advisor, equally prominent, says the speculative frenzy has stymied things for the more serious collectors he services. “They have to do a lot more work in building their collections”, the adviser explains. “And there’s much more hysteria about access. Suddenly people are being forced to make instant decisions about whether particular works fit their collection, because they’re competing with speculators who just want anything with the right name. The galleries and consultants are getting stuck in the middle between real collectors and these hedge-fund guys.”

Often, such old-school collectors regard the new arrivals with a certain disdain. “These people are not of the same ilk as dedicated, passionate collectors”, says Miami’s Martin Margulies. “They’re only interested in money and it’s not a healthy thing for the art world. But they’re not really competition. They have no idea who Ugo Schmolz or Adolf Lozzi are.” (Nor does this Art Newspaper writer, but assuming they actually exist, their market value jumped the moment the preceding sentence was printed.)

“When you go around to booths, you hear these guys asking how soon a work will appreciate by 30%”, says veteran US collector Mickey Cartin. “Often an investment advisor is telling them to put 10% of their portfolio into art.”

Yet Mr Petersen thinks it facile to blame it all on the finance types: “It’s wrong to think that financial speculators are some kind of ‘external’ force that has suddenly arrived. This speculative behaviour is also fuelled by the art dealers themselves.” And to the extent that dealers are encouraging such speculation by implying sotto voce that particular artists will offer profits down the road, they may be slowly slicing their own throats. “Art may be treated as a kind of currency”, points out Mr Cartin. “But it’s not like gold or Swiss francs, and the first people to exit the market will be those in it for the wrong reasons.”

Fearing the financial exposure such an exit would trigger, many galleries fight back against speculation by engaging in a sort of cooperative intelligence service. “We keep a list of people who buy with other motives, which we pull together by talking with galleries to figure out which collectors resell work and how they handle it”, says Zach Feuer of New York’s Zach Feuer/LFL, whose artist Schutz, among others, has been seen as a prime target for speculators and serious collectors alike.

While such demand does give dealers the opportunity to be highly selective in the placement of the pieces and to resist deep-discounting demands, it sometimes also create problems. “Many of the really interesting collectors are scared off by buzz”, explains Mr Wirth. “I have to convince them that Sasnal’s a serious artist despite the hype.”

Things get even trickier when the artist’s market has not taken off. Sometimes, dealers just grit their teeth while selling to known speculators, anticipating having to clean-up secondary-market messes down the road as works get “flipped” at auction. “When you’re a small business, it’s noble to turn down that money”, observes Oliver Kamm of 5BE Gallery. “You can’t always afford to prioritise long-term concerns over short-term issues like paying rent. But what you can never do is let one of those guys have five works at the same time. It just gives them too much leverage.”

Originally appeared in The Art Newspaper as 'Here come the speculators'