The Global Art Market – Out with the New and in with the Old?

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Weighing Personal Taste vs. Investment Value

There is a common adage among Fine Art professionals when it comes to collecting art, buy what you love. The rationale is based on the premise that one has to live with the work they purchase so they better enjoy it if they are to make such a capital expenditure. There are no guarantees that a painting bought for the hypothetical sum of $100,000 today will increase in value in 1, 5, 10 years or more. However, as a collateral asset lender, Borro cannot simply lend money against works we “love,” meaning pieces that speak to us for their emotional, stylistic, and intellectual attributes.  Instead, we are constantly thinking objectively about the marketplace and how the value for a particular work will maintain itself overtime.  Of course, no one has a crystal ball to see into the future. But in an era where contemporary art dominates the global market, there are advantages for collectors to also consider the cooler side of the art world.

Advantages of Old Masters

For example, Old Masters has seen an incredible decline in the past several decades. According to the 2016 TEFAF Report, this segment saw a 33% decline from 2015 to 2014. While such a downward trend may seem concerning for potential investors, it may also suggest an opportunity to once again consider these rarefied historical objects. Adam Prideaux of Hallet Independent Art suggested in a Financial Times article from 2015, that some feel the “…markets are seen as undervalued.”  But in the case of Old Masters, undervalued does not mean there is an expectation that prices will increase for this genre. Instead, industry insiders are looking with bewilderment when comparing prices achieved for works that are hundreds of years old and that of works created in the last 50 years or less. As London Old Masters dealer, Guy Sainty was quoted in the New York Times this past summer stating that Italian Baroque artist, Orazio Gentileschi’s, “Danae” sold for $30.5 Million, which according to him was,  ”less than a Christopher Wool and half the price of a Warhol.” Whereas contemporary art may be more visually accessible to a new wave of collectors, Sainty appears to be making the point that Old Masters works are more financially accessible.

As a luxury collateral asset lender, Borro is a stakeholder in the Fine Art we lend against. Old Master prints, works on paper, paintings, and sculpture offers us an opportunity to diversify our loan book. With so much contemporary art being bought and sold, such objects help mitigate our exposure to just one segment of the art market.  From a risk management standpoint, there are also other benefits when considering Old Masters. For instance, artists born before 1850 are known quantities. History has already judged their artistic and academic merits, whereas contemporary artists are in the midst of first being critically assessed by both collectors and academics. Young up-and-coming artists in their twenties and thirties may fizzle out in the next several years, whereas shifts in the market for Old Masters are typically more gradual. Furthermore, the objects themselves should also be well documented in scholarly publications given the long life of the work. These are objects for which exhibition and publication history should be robust and easily obtainable via library research. Even the condition of the piece may be less concerning. Minor issues become less problematic for a work that dates back to the Renaissance. One would expect normal wear and tear in such instances. Likewise, one would expect a work created in 2015 to be in pristine condition.

Cautionary Tips for Old Masters Collection

Of course, there are always pitfalls when investing in any particular area of the market.  In the case of Old Masters, one needs to do their due diligence with extreme thoroughness. Given that these works have been passed through various hands, locations, and lived through times of great upheaval such as World War II, one has to be certain that works have been legitimately transported and acquired. Forged and looted artwork can threaten the integrity of the market. And in the case of condition, while relatively minor damage may not be alarming, extensive damage or restoration will likely have an impact on market demand. Hence, there is another adage common in the art world these days — buyer beware!

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About the Author:

Elliot is the Director of Fine Art Appraisals & Sales at Borro Private Finance.