Profit and risk: investing in unknown art

Philip Hoffman, chief executive of The Fine Art Fund Group, discusses art investments and offers pointers towards the next big buys

3 min read

Investing in the art world requires expertise. The delicate balance of financial and art knowledge needed to make the right purchase is essential. This understanding is potentially even more important when investing in unknown markets, such as those including very contemporary artworks and artists.           

Back in 2005 we bought a Cindy Sherman photograph for $70,000 and sold it for nearly $250,000 five years later

Investing in an artist who is at the beginning of their career brings with it a lot of associated risk. Some investors and collectors like the notion of supporting an undiscovered genius, placing bids on pieces which are set to shoot up in popularity. For others, the relative stability of the Old Master markets makes for a more enticing purchase.

Saying this, some of The Fine Art Fund Group’s most successful deals in percentage growth terms have been with younger and less tested pieces. For example, back in 2005 we bought a Cindy Sherman photograph for $70,000 and sold it for nearly $250,000 five years later. Understanding the frameworks, finances and fetishes of this relatively opaque world is paramount.
 
When investing in younger emerging artists, there is a certain amount of research that you can do to look towards their potential investment value and the value of the work you wish to buy. You can visit their studio, get to know their practices a bit, see how much they produce a year, and also research the galleries that represent them and their potential to place the artist with the proper collections and museums.

However, as there are many outside factors which can influence and change an artists’ practices, there is always a large amount of risk involved. It therefore matters that you personally like the work that you are buying and are happy to live with it in your collection.
 
If it is the really big returns an investor is seeking, focusing on blue-chip, more established works, genres, artists and styles certainly puts you in the right direction. When you look at the works reported to have generated the highest prices, they are not by artists who are new to us, but those we have seen in books, museums, galleries and on art history programmes.

With the question of when the next big sale will hit our papers and which work will be first to reach the $1-billion mark, I imagine most speculators will be focusing on the Impressionists, Old Masters and Modern genres, rather than the newest kids on the block. Is it going to be a Leonardo, Picasso – or perhaps an artist who is as yet unknown to us?

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