Top Collectors Reveal the Secrets of How to Invest in Art

Bloomberg | Frederik Balfour

Returns can be eye-popping, but collectors must avoid the pitfalls of forgeries, fakes and rapidly changing tastes.

Andy Warhol once said: “Making money is art.” But what about making money from art? A boom in the global market has delivered some eye-popping returns in the past few years, drawing new collectors keen to invest in an asset class that offers cultural as well as financial appreciation. Irish horse breeder John Magnier will get at least $150 million for a painting of a nude by Amedeo Modigliani on May 14 in New York at Sotheby’s, thanks to a third-party guarantee. He paid $26.9 million for the work in 2003.

For many investors, the market has grown too big to ignore. Last year global sales reached $63.7 billion, according to an Art Basel and UBS report. Art has delivered average annual returns of 8.9 percent since 2000, an index tracked by shows. But the market is opaque, unregulated and sometimes extremely illiquid. Gallery owners and auction houses charge commissions of 25 percent or more, sometimes negotiable, and art buyers must avoid the pitfalls of forgeries, fakes and rapidly changing tastes. “In the art market there are no rules, that’s why it is such a minefield and why it has such opportunities,” says Wendy Goldsmith, a London-based adviser in modern and contemporary art. “When I start with a new client, half my job is to say no, especially to people from finance who think because they can master one market they can master any market.”…read more

Image: A visitor takes a photo of ‘Statue of Venus Obliterated by Infinity Nets No. 2’ by Yayoi Kusama. Photographer: Suhaimi Abdullah/Getty Images