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Op-Ed: Why treating art as an investment will significantly increase your values

Is it worth investing in art?

Investing in art is different from many other investments, such as cars, stocks, or bonds, in that if a financial need arises, you can sell these assets reasonably quickly.

But art investments don’t have this flexibility of immediate monetization. It depends a lot on the artist, the trends, the market at the time, whether it sells well in the auction houses or if it sells well in the many galleries that have secondary market operations in Puerto Rico, the United States, or anywhere in the world.

On many occasions, the achieved prices are usually based more on market trends; you must find the right buyer, and other times if the buyer perceives that the seller has some need, that will affect the final price.

Although art is a visual, sensory, and essentially a representation of personal taste, we should not get carried away by our emotions as doing so can cost you dearly.

Investing in art must be a decision studied from all angles rather than simply an impulse or a passion for art. To properly position investing in art as a source of income that produces profits, you must properly analyze the artist, the subject matter, and most importantly, and as I mentioned before, determine if the artist you are interested in has a well-established secondary market.

What is the size of the art market?
Art has been considered an asset that can trade, and it has several secondary market outlets and auction houses; some have been around for more than 200 years, if not more. However, as of late, any piece of art values increases relied on mostly anecdotal conversations among the ultra-rich or experts.

Today the art market has well over $60 billion in yearly sales volume and a total value that exceeds $1.5 billion to $1.8 trillion. So yes, art represents a sizable asset class that is bigger than the private debt market that is only $800 billion, or investments in private real estate, natural resources, and infrastructure that reach $1.6 trillion.

We reviewed the Masterworks Post-War and Contemporary Index, which tracks returns for art created since World War II, and uses works of art created since 1945. We note that since 1995, contemporary art has returned 14.0% annually, within 2020 returns topping 15.1%.

My Aha! Moment
One of the moments that offered me the most extraordinary clarity happened some 15 years ago while attending art Basel Miami, when we visited the Durban Segninni art Gallery in Miami. As it happens, Durban Segnini had an exhibition of the father of optical geometry painting, Colombian Omar Rayo 1928-2010.

Omar Rayo’s works impressed me so much that we bought half of the pieces there, and three years later, in June 2010, Omar Rayo died, and his prices skyrocketed.

But that visit was much more than going to see the works of Omar Rayo, and it became to know first-hand a vast world of great Latin American artists, all with a large secondary market. Artists such as Jesús Rafael Soto, Fernando de Szyszlo, Antonio Seguí, Wilfredo Lam, Pablo Atchugarry, Carlos Rojas, and Omar Rayo, among others. 

For gallery owner Segnini, it is an integral part of his way of doing business to educate clients to expand their boundaries beyond their comfort zone. Over the years, that education that lasted a few hours became one of the best lessons I have received in the art world. That discussion with Segnini was followed by long hours of reading and searching for the great Latin American masters. In my case, the optical geometry paintings, which are my favorite, are my focus when collecting. 

Here in Puerto Rico, we also have great galleries and extraordinary artists who have an enormous interest in educating their clients to invest, learn more, and broaden their horizons while delving into different types of works of art.

Likewise, an excellent secondary market has also developed here for pieces you are no longer interested in or need to convert into cash. In an abundance of caution and to be absolutely transparent, I will not mention names given that I have a first cousin who owns a gallery and a first cousin who is an artist.

Since I did not have the opportunity in my day to read an article like the one I am writing for you, and it cost me dearly to learn, I want to share some lessons learned over the years:

Start with small investments: This will allow you to learn what works best for you to develop your strategy and gauge market responses. Also, if you start small, if you lose money, it will be manageable.

Focusing on one category will serve you well: The idea behind this thought is that it is much easier to learn, for example, Optical Geometric art, and learn all you can about the style, the masters, the best works, and pick pieces that appeal to your style. Developing the mind to become a collector will help you tremendously.

Keep up with the best and latest trends: Visit local galleries, have conversations with the owners. Also, connect with Sotheby’s and Christie’s to receive the latest auctions and the most important international trends.

Go to art fairs: Visit local art shows and when you travel, visit as many museums as you can, visit art Basel Miami, Art Miami, ARCO Madrid, The Armory Show, the Venice Biennale, and many others, they will help you see trends, prices and what sells best and what doesn’t. Plus, it will give you a sharper perspective and a global view.

Be on the lookout for emerging artists: While my approach is to always buy from artists that have a determined secondary market, like all asset classes, you should have some money set aside to invest in those promising emerging artists, such as Thiago Rocha, Luiz Zerbini, Gabriel Orozco, Joiri Minaya, Raura Oblitas, Jose Carlos Martinat, Kate Cooper, or Josh Klein, among many others. While the risk in an emerging artist is higher, so will be your returns if the artist you select makes it to the big leagues.

Don’t be shy – negotiate as if your life depends on it: When buying art, you will want to develop relationships with galleries, artists, and other sources, so making fair and sensible offers and being patient will go a long way. Occasionally some of my proposals have not been considered, but the art of being patient always pays well as many times they call you back to offer you something better or the same piece. In my home office in front of the computer, I have a work by an artist of the geometric optical art segment that at the time my offer was not considered; that day I regretted it very much since I loved that piece and I spent more than a year with it on my mind.

Suddenly, in December of the following year, my wife, looking for a Christmas present, managed to buy it. Patience and standing firm worked, but I think that in this case, it was my wife’s sensibility that closed the purchase.

Author Francisco Rodríguez-Castro is president of Birling Capital.

Creating a complete collection is an incredible thrill and finding the pieces that fit best is like solving a big puzzle.

The great Pablo Picasso often said, “Everyone wants to understand art. Why not try to understand the song of a bird? Why does one love the night, flowers, everything around one without trying to understand them? But in the case of a painting, people have to understand. If only they would realize above all that an artist works of necessity, that he himself is only a trifling bit of the world, and that no more importance should be attached to him than to plenty of other things which please us in the world, though we can’t explain them. People who try to explain pictures are usually barking up the wrong tree.”

In conclusion, the development of becoming educated in the art world is a journey in itself and one to be enjoyed and appreciated.

One of the great collectors of our time used to classify the works of art he considered buying using the three O’s: Oh!; Oh, my!; Oh, my God!!!

So, when you’re going to invest in art, always focus on the works that will cause you to react with an Oh, my God!!!

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This story was written by our staff based on a press release.

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