7/26/2015

Wine Lenders


Over the past few years,we have seen much in the growth in fine art becoming an asset class.  In addition to fine art there are also luxury items, such as cars, watches and fine wines. The NY Times just posted an interesting article on the growth of fine wine collecting and the ability in using the collectible vintages and cellars as collateral for loans.

The article notes that the loan to value ratio of fine wine can be as high as 60% with interest rates in the 8%-10% range, which is not bad. In order to get the loan, the wine has to be properly valued, stored, and monitored in a wine storage facility so the owner does not drink it. Additionally, the wine must be considered collectible. The article notes many wine collectors are taking out the loans in order to purchase and invest in new wine purchases.

The NY Times reports
As a restaurateur and wine collector, Nick Gangas knows the special pleasures of pairing a fine Burgundy with a roast chicken or a leg of lamb. Yet recently, he discovered another use for his Burgundy — as loan collateral.

Like a growing number of collectors, Mr. Gangas has pledged some of his finest French wines for large cash loans with generous terms. Using $300,000 worth of his Domaine de la Romanée-Conti, Chambertin and other wines, he’s about to receive a loan of about $150,000, which he plans to use to open a new restaurant in the Chicago suburbs.

The bottles “would be just sitting in the cellar aging,” said Mr. Gangas. “Why not use them to raise capital? By the time they’re ready to drink, I’ll have paid back the loan.”

For the wealthy, wine has become the ultimate liquid asset. With prices for top vintages soaring past $10,000 a bottle, fine wine is being bought, sold and traded at auction like a new investment class, with its own value indexes, investment funds and speculators. And now wealthy collectors are using wine as leverage — raising cash to invest in more wine and create even more wealth.

A new crop of wine lenders has started offering collectors cash for up to 60 percent of the value of their collections, with relatively low interest rates. A collector with a $1 million collection can obtain a $600,000 loan, often at an 8 percent to 10 percent interest rate — or a fraction of the average credit card rate. In the last two years, wine lenders have issued tens of millions of dollars in loans with wine as the sole collateral, according to several lenders.

The top lender is WineCredit, founded by a former Wall Street credit analyst, which has written $20 million in loans on 114,000 bottles of wine in the two years since it was founded.

“Whether it’s real estate or wine, it doesn’t make sense to accumulate assets with pure cash,” said Patrick Stella, the chief executive and founder of WineCredit. “With wine, you can borrow and not put your home or some other important asset at risk. You can finance toys with toys.”

There are catches, of course. The wine must be valued and verified by an expert, and more expensive, collectible wines are typically preferred. The wine must be stored in an approved, monitored wine-storage facility, so as to prevent borrowers from drinking their collateral at a dinner party.

The rise of wine loans is the latest extreme in a tale of two credit markets, where many Americans still can’t get a mortgage but the asset-wealthy are feeling drunk with credit. Banks are eager to extend credit for private jets, multiple homes, art, jewelry and investments as asset values rise and the wealthy prove to be the richest source of borrowing.

So far, default has not been a problem (lenders can’t recall a single one). Yet some worry that the rise of wine lending may signal the top of an already pricey collectibles market. Sotheby’s last year sold a 114-bottle collection of Domaine de la Romanée-Conti for $1.6 million, or more than $14,000 a bottle.

Wine also has special financial risks: Aside from being a consumption good (it’s essentially old grape juice) and notoriously prone to fraud, it can be difficult to sell when others are also trying to dump their collections. Adding borrowed money to a market highly linked to stocks and wealth cycles could make the booms and busts in wine even more extreme.

“The risk is that when you’re forced to be a seller, it usually comes at a time when everyone else is forced to be a seller,” said Elroy Dimson, an economics professor at the London Business School and co-writer of two studies on the wine market. “Prices look smooth over time but when you try to sell they can be highly volatile.”

For now, however, wine lending is unlocking millions of dollars from the cellars of the rich.

Mr. Stella started learning about wine while in college at Stanford. After working in the hedge fund industry investing in junk bonds and synthetic credit derivatives, he noticed that the wine trade was perpetually short of cash. Collectors and restaurants often had millions of dollars of wine in storage but banks were reluctant to lend against wine, usually because they weren’t sure how to value it.

Mr. Stella developed a methodology and systematic approach for valuing wine, with a growing database of global prices, buyers, sellers and sales volumes. The system allows him to offer loans with an average interest rate of 8.78 percent and a loan-to-value ratio of up to 60 percent, meaning collectors can borrow up to 60 percent of their wine’s value. Other wine lenders, like Borro, usually charge interest rates of more than 30 percent a year and offer loans of 40 percent to 50 percent of a collection’s value.

WineCredit’s largest loan has been $1.5 million. Borrowers often prefer to hand over their highest-priced Burgundys or Bordeaux so they don’t have to pledge or ship as many bottles. Yet Mr. Stella said he happily accepts wines as low as $100 or $200 if they can easily be sold or traded.

Since the wine must be held in an approved site during the life of the loan, wine lending has led to an accompanying surge in wine storage. Domaine, a wine storage and advisory firm, has five sites around the country with a total of more than 1.4 million bottles. Customers who already have their wine at Domaine are taking advantage of a new perk — the chance to borrow against their wines without any extra shipping or storage costs.

Not everyone gets approved. Marc Lazar, Domaine’s chief executive and founder, says collectors who come in with poor records, untradable wine or murky stories don’t get loans. “I’ve seen several deals come across my desk that don’t come to fruition,” he said. “There has to be a good paper trail.”

Borrowers are mainly using the money to buy more wine, betting they can pick the winners that will surge in value, which they can sell to pay off the loan and make a profit — similar to buying stocks on margin. Other wealthy borrowers are using the money for divorces or tax payments, or to buy a boat or a car. And many of the wealthy, especially business owners, have frequent short-term cash squeezes.

“Rich people never have as much liquidity as we think they have,” Mr. Stella said. Of course, turning an age-old beverage meant for enjoyment and sharing into a financial instrument may offend many wine purists. It could also drive up the prices of some wines beyond the reach of everyday buyers, as the wealthy bid more aggressively on wine with borrowed cash.

Still, Mr. Lazar said, wine lending will affect mainly a small group of trophy wines. “There is still a lot of darn good juice out there for $40 or $50 a bottle,” he said.
Source: The NY Times 


7/24/2015

Artist Resale Rights


I have posted in the past about the American Royalties Too Act in the past, which is proposed legislation which would pay living artists a royalty of 5% of works sold at auction for $5,000 up to $35,000. The Art Newspaper recently posted on a discussion on the topic with an artist point of view as well as concerns about additional market regulations that would come with the bill, if passed.

The Art Newspaper reports
It has become a common adage to say that the art industry is one of the last unregulated markets in the world—alongside the arms, organs, sex and drug trades. This view was aired by an audience member on Wednesday evening, 22 July, at a debate on the pros and cons of American resale royalty legislation held at Artists Space in New York.

The German-born artist Hans Haacke and the painter R.H. Quaytman joined legal experts at a discussion prompted largely by the possible re-introduction of the American Royalties Too (ART) Act, as proposed by the New York Representative Jerrold Nadler. If passed, ART would require sellers to pay living artists a 5% royalty on works sold at auction for $5,000 or more, capped at $35,000. A similar royalty system exists outside of the US, for example in the UK and most European Union countries where all works re-sold (not exclusively at auction) by living artists and those who died within the past 70 years are subject to a royalty.

Naturally, artists are generally in favour of such a proposal. Without a federal resale royalty law in place in the US, some have resorted to drafting their own terms instead. "I've always said, 'You play by my rules or you can't have it,'” said Haacke this week. He requires his collectors to sign a contract that grants him 15% of future resale profits. However, “if I had to litigate it would be burdensome and very expensive. If instead there was a law that would do the litigation for me, that would give me an advantage.”

Artists ought to pause before jumping too eagerly on board the resale royalty bandwagon, said the New York State Supreme Court Justice Barbara Jaffe, also speaking on the panel. Jaffe said. "Do they really want their trade regulated? When you have regulation you also have the government coming in and examining you—the IRS [Internal Revenue Service] and all those other wonderful things." Plus, she said, “there’s no contract that can’t be gotten around.”

Increasingly pricey secondary market sales do more than just cut artists out of the deal, said another panellist, Maxwell Graham, the owner of the New York gallery Essex Street: "The secondary market has become an inspiration to a lot of the art that gets made today, and not always in the best ways." While Haacke said that having a contract has never changed the way he thought about his work, Quaytman was not so convinced: "It might come to mind if you think you're getting a percentage at auction," she said. "I do think it would affect me." 
Source: The Art Newspaper 


7/23/2015

Digitizing Art?


Cindy Charleston Rosenberg, ISA CAPP and current president of the International Society of Appraisers sent me an interesting Bloomberg Business article on a new website which will attempt to digitize, track and even authenticate pieces of art.  The art will consist of fine art, prints, multiples, and books. The site will use blockchain technology to track and document pieces of art. The concern over blockchain technology is the enormous amount of data collecting and which would need to be collected in the future and will enough important galleries, auctions and collectors participate and include info.  Bear in mind, there are many collectors who prefer anonymity.

Technology is again having a potentially significant impact on fine art markets.

Bloomberg reports
Is it possible to digitize and verify every art object ever made? Verisart, a new site co-founded by Robert Norton, previously chief executive officer of two online art-commerce sites, Saatchi Online and Sedition, is going to try.

The digital startup hopes to chronicle original artworks, prints, multiples, and books by using block chain, thereby assigning each object a (hopefully) unassailable certificate of authenticity. Each object’s provenance, in turn, is created step-by-step by its owners, who add their e-mail addresses to an object’s data when they purchase one. In the project’s second phase, down the road, Norton plans to catalogue older artwork by extending the verification service to online sites and artists’ estates. Eventually, he hopes to work with appraisers and insurers to add works that have already been validated.

First, though, the plan is for artists to use image identification software provided by Verisart, which is based in L.A. and will launch in late September, to add art to the database as they produce it. Along with the information you’d get from a brick-and-mortar gallery (artist, title, year, materials), the artwork’s “signature” will also include price information and metadata that will allow artwork to be catalogued and searched by collectors and easily ingested by museums. “I’ve spoken to successful artists, and they all have some form of database management,” says Norton. “At the end of the day, they want some definitive control of their output, and this potentially empowers them.”

This could be a potential boon for creators. Many artists have voiced frustration over the fact that they have no idea who owns their art, let alone where it is on the planet. The art market—rife with opportunities for fakes and forgeries and theft—desperately needs airtight authentication methodology. An easily accessible, readily identifiable process that verifies an artwork's authenticity would benefit both artists and collectors in equal measure.

Verisart's model plans to eliminate questions of authenticity and ownership through a real-time verification process. (Pictured: Gerhard Richter, "Abstraktes Bild," 1990 via Christie's)

Norton, who recently announced that his company has received backing from Rhodium, an Israeli venture capital firm, plans to use the tool for an even bigger goal. He wants to create a Verisart-authenticated database that is shoppable. Using it, anyone could search for an artist or artwork, find images, price history, and provenance, and then—if the present owner of the artwork has opted in—contact them to purchase the artwork.

“We think long-term monetization will come through building a verified database of inventory,” he says. “We think that that will enable transactions through Verisart.”

A Few Problems

The first and potentially most damaging roadblock is simple adherence. What makes Verisart a useful (and profitable) tool is the voluntary participation of an artwork’s present owners. Many collectors might choose not to voluntarily add their contact information—and the price they paid for a painting—to a publicly available database for the same reason that you wouldn’t add your name to a list of people who own diamond earrings, bedroom safes, or second homes on Nantucket. It’s a question of discretion and security.

Norton counters that his program will protect participants’ privacy.  “There are sensitivity options that owners of these works will be able to choose,” he says. “The core function of what we’re doing is a decentralized service, but in order to make something useful to the art world, we don’t think it can be entirely so.”

A further potential problem: Verisart presupposes that a broad audience is champing at the bit to buy art online, thereby bypassing traditional such art market business models as galleries and auction houses. That’s not necessarily true. “What’s very clear is that the success of the auction houses over the last 10 years has been in bringing new buyers into the art market who want to—prefer to—be able to buy from Sotheby’s and Christie’s,” says Marion Maneker, founder of ArtMarketMonitor.com, an art industry news website. “Instead of bypassing the art market, new buyers are flocking to its most established elements.”

Breaking Traditional Models

It’s not just collectors. Artists, who depend upon galleries and dealers to promote their work, fund their production, and develop a collector base, are arguably even more reliant on traditional business models than collectors are. Without established artists’ support of—and participation in—the Verisart platform, the site has the danger of becoming a repository for aspirational artists who have yet to (or will never) receive art market attention. “The only people who don’t want to go through the traditional system are those who can’t get in to the traditional system,” argues Maneker.

Norton believes that this rule of thumb doesn’t apply to lower-value art objects. “When people buy editions and multiples, they consider themselves collectors of those artists’ work,” he says. “I don’t think it just needs to be verification of original artworks; editions are a great point of departure.” Paintings by David Hockney have sold for millions, for instance, while a lithograph in an edition of 75 by the artist sold for just $2,156 at Christie’s in London last year. Successful artists, Norton says, can participate on Verisart “if it doesn’t threaten their galleries,” he says. “It becomes a really interesting value addition in the long term.”

In one respect, that’s the problem. The very nature of Verisart means that success won't be discernible until it has been widely adopted. “I don’t underestimate the mammoth task ahead of us for one second,” says Norton. “For sure, there will be a bunch of hurdles to overcome. But as an entrepreneur, that’s what gets you up in the morning.”
Source: Bloomberg Business 


7/22/2015

BAA/Mei Moses June Tracking Report


Beautiful Asset Advisors/Mei Moses Family of Art Indexes just release their June world all art index results.  The index remains in the positive for the year, and art continues to lead equities for YTD. From June sales at Christi's and Sotheby's, 635 repeat sales were tracked, with an average time between sales of nearly 19 years and less than 10% were from the Old Master/19th Century category.  The index has a YTD increase of 3.8%.

Mei Moses reports
BEAUTIFUL ASSET ADVISORS® LLC     7/20/2015
                         
     INSIGHTS ON ART MARKET FINANCIAL PERFORMANCE THROUGH
JUNE 2015 BASED ON THE MEI MOSES® FAMILY OF ART INDEXES©
                           
                                     JIANPING MEI & MICHAEL MOSES

FAIR JUNE AUCTION SALE RESULTS HELPED KEEP THE MEI MOSES® WORLD ALL ART INDEX IN POSITIVE TERITORY FOR THE YEAR.  U.S. EQUITIES REMAIN NEAR THEIR ALL TIME HIGHS BUT THEY CONTINUE TO SLIGHTLY UNDER-PERFORM ART ON A YEAR TO DATE BASIS.

THE WORLD WIDE AUCTION ART MARKET IN JUNE SHOWED A STEADY RESPONCE TO GLOBAL ECONOMIC AND STOCK MARKET VOLATILITY.  HOWEVER THE YEAR TO DATE INCREASE OF 3.8% IN THE MEI MOSES® WORLD ALL ART INDEX THROUGH JUNE MOVES BELOW ITS HIGH POINT OF THE YEAR OBTAINED IN MAY. ©

        MONTHLY TRACKING GRAPH THROUGH JUNE 2015




June is one the busiest month of the spring international auction calendar. Most of the sales took place in London, Europe and Hong Kong where Traditional Chinese (TCWA), Impressionist and Modern (IMPMOD) and Post War and Contemporary (PWC) sales were featured.  Our data collection and reporting efforts based on 38 Sotheby’s and Christie’s world wide auctions that occurred in June produced 635 repeat sale pairs representing all collecting categories except American and Latin American Paintings. These pairs allowed us to create the Mei Moses® world all art tracking index for June 2015 which produced the aforementioned 3.8% gain as compared to the closing value for year end 2014.  We need to point out that the tracking result is based on the assumption that all the pairs collected to date in 2015 are used to estimate the year end result assuming no other pairs are added to the database throughout the remainder of 2015.  Thus the June tracking result would be the calculated year end result based on that assumption.

The biggest June sales were in the IMPMOD and PWC categories in London and several other European cities followed by Traditional Chinese works of art (TCWA) in Hong Kong.

The average auction interval of the 635 objects was about 18.8 years.  This is not unusual considering that less than 10% of the results were from the OLM19C category.

Please note that prior performance of our indexes does not guarantee future results.  In addition, there is no guarantee that random collections of individual works of art or stocks will yield index returns.  We are not financial advisors and we are not in the business of recommending art as an investment.  We also have no comparative advantage in forecasting the future direction of the art market.  Investment decisions should be based on the risk return tolerance and time horizon of the investor with, if desired the support of a licensed financial advisor.   This information is provided "as is" and with no representations or warranties either express or implied of accuracy, merchantability, fitness for a particular purpose or of any other nature are made with respect to this information or to any expressed views presented in this information.  
Source: Beautiful Asset Advisors 


7/21/2015

Art Market Slowing?


The Wall Street Journal takes a look at Christie's recent financial releases, and although at record levels, questions if the trend and momentum will continue. The WSJ looks at a slowing of growth rates at Christie's as a factor for its prediction.

The Wall Street Journal reports
The art market is enjoying record prices, but there are signs the pace of its growth may be slowing.

London-based auction house Christie’s International PLC said Monday that it sold £2.9 billion, or $4.5 billion, of art during the first half of the year. The total represents an 8% increase in British pounds from the same period last year, but it amounts to a statistical dead heat in U.S. dollars, a telling plateau after several seasons of runaway growth.

Even factoring in currency fluctuations related to the strong dollar, Christie’s 8% sales increase during the 2015 first half represents a winnowing from the 12% increase it saw a year ago compared with 2013.

Christie’s latest total included $4 billion in auction sales, an 11% increase from a year ago. Its $515 million total in privately brokered art sales was a 38% drop from $828.2 million in the 2014 first half.

Rival Sotheby’s, based in New York, said it auctioned $3.2 billion in art during the first half, the same auction total it achieved a year earlier. Both auctioneers said their totals through June 30 excluded some art sold during a marquee June sale series in London that stretched into early July. Sotheby’s is scheduled to release its consolidated totals in August.

In a realm dominated by “I can’t believe you own that masterpiece,” both houses fared well selling art trophies during the first half, including Christie’s nearly $180 million Pablo Picasso, “Women of Algiers (Version O),” and Sotheby’s $66.3 million Vincent van Gogh, “The Allée of Alyscamps.” Both were sold in May in New York.

But the slackening pace of sales growth indicates a few collectors may be feeling a measure of sticker shock. Christie’s first-half totals fell 37% to $110 million for old master paintings, 19th century European paintings and Russian art. Those categories suffered in part because Russian bidders sat out sales as tensions with Ukraine escalated. Christie’s also struggled with its luxury segment, which includes wine, watches and jewelry. It sold $382.3 million of these luxury goods during the first half, down 19% from a year ago.

Stephen Brooks, Christie’s global chief operating officer, said collectors aren’t bowing out. What is happening, he said, is that sellers of blue-chip artworks are getting choosier about where and when they put their pieces up for sale—and for how much. He said that fewer collectors chose to sell their art privately this spring, resulting in a “lumpy marketplace” for private sales that he expects will surge by year’s end.

Shoppers are also looking at cheaper art alternatives. Christie’s had a 14% bump in the number of bidders vying for middle-market artworks, or pieces roughly priced between $100,000 and $1 million, he said.

“We’re not seeing a letup in interest,” he added. “We’re seeing a balanced market.”

Roughly a quarter of Christie’s clientele during the first half of the year was first-time bidders, so Christie’s challenge this fall, Mr. Brooks said, is to find artworks that appeal to novice and seasoned bidders alike. One strategy will be to offer more mixed-category sales in which pieces span several collecting categories instead of being lumped into a single art period or style, he added.

In Amsterdam, Christie’s sales rose 16% to $22.8 million during the first half in part, he said, because the house began offering sales that blended high-end furniture and contemporary art with the old masters that traditionally sell well there.

Christie’s also tried to stir up more interest in its impressionist and modern-art category by conducting a cross-category sale on May 11 that combined older mainstays like Claude Monet with coveted examples by living artists like Peter Doig and Cady Noland. The sale, called “Looking Forward to the Past,” totaled $706 million. “Collectors love that diversity,” Mr. Brooks said.

In terms of categories, Christie’s sold $1.4 billion in postwar and contemporary art, up 8% from the 2014 first half, and $1.2 billion in impressionist and modern art, up 8.5%.

Christie’s sales of Asian art also grew 25%, to $461.4 million, compared with a year ago. Mr. Brooks said the house owes much of its success in the category to a consignment of coveted pieces from the estate of Asian art dealer Robert Hatfield Ellsworth that drew bidders despite China’s volatile stock market.

Collectors in the U.S. outspent all rivals this spring, taking home $2.2 billion of art from Christie’s, up 26% from the 2014 first half. Collectors in Europe bought $1.3 billion in art, down 11% from a year ago.

The art market tends to quiet down in late July and August, but it will be tested anew at sales throughout the fall in London, Hong Kong and New York.
Source: The Wall Street Journal 


7/20/2015

Christie's 1st Half 2015 Results


Christie's released its first half 2015 sales info, and it was a record half year, with sales totaling $4.5 billion, up 8% from 2014.  For some of the details, see the Christie's produced info-graphic.

The Art Newspaper also reported that private sales were down by 1/3 from the previous year. We had seen that earlier with some of the Sotheby's results as well.  It appears sellers are willing to roll the dice with auction sales, and for quality fine art with guarantees, the downside is limited.

Christie's reports
CONTINUED GROWTH AS CHRISTIE'S HALF YEAR SALES ACHIEVES RECORD TOTAL OF £2.9 BILLION

Continued Growth as Christie’s Half Year Sales Achieves Record Total of £2.9 Billion
New Buyers Grow to 24% as Art Collecting Continues to Engage Global Audiences
Curatorial and Sales Calendar Innovation Results in Highest Sales Week in History
Market Share for Major Categories including Impressionist & Modern, Post-War & Contemporary and Asian Art

London /New York / Hong Kong - Christie’s announces today record half year sales of £2.9 billion, up 8% ($4.5 billion, up 0%) on the same period for 2014. Results were underpinned by strong results across numerous categories including Impressionist and Modern, Post-War and Contemporary Art and Asian Art. The company has focused on curatorial innovation and a revised sales calendar to attract collectors at all levels across all geographies, and continues to invest in online platforms as well as traditional salerooms and Private Sales.  New clients represented 24% of buyers. The number of middle market buyers grew by 14% and further reflects the continued commitment of Christie’s to offering art and objects across a broad spectrum of collecting areas and price points.

Patricia Barbizet, Christie’s Chief Executive Officer, said: “This season, using thoughtful curatorial innovation, we have worked with our clients to explore different genres, geographies and eras of creativity as the boundaries of their taste and interests expand.  During the first half of 2015 Christie’s clients spanned 99 countries, demonstrating how truly international sales activity is at all levels and reflecting the expanse of the art market. We are meeting new demands while continuing to show strength in core categories and maintaining market share. Buyer activity of lots between £100,000 and £1,000,000 continues to grow, with the number of buyers up 14%.  Our early investment in online and E-commerce platforms continues to add value across the business. We look forward to more innovative collaboration across categories and regions during the second half and remain fluid as we challenge traditional models of auction for new models of selling art.”
Click Info Graphic to Enlarge


Source:  Christie's


7/19/2015

A Look at the Contemporary Art Market


The NY Times takes a quick look at the current state of the contemporary art market and the surging prices.  The article notes the high number of wealthy individuals who have the ability to buy and invest in fine art, and are doing so for numerous reasons. This includes tax advantage which come with private museums as well as an alternative investment to act as a store of value.

The NY Times reports
LONDON — This has been, by any reckoning, a momentous first half of the year for the art market.

In February we learned that Qatar had bought a Gauguin painting for an undisclosed price of as much as $300 million; in May, an experimental week of Impressionist, modern and contemporary art sales in New York raised more than $2 billion, including $179.4 million for Picasso’s 1955 “Les Femmes d’Alger (Version ‘O’),” a high for artwork sold at auction; and in June, several prominent contemporary dealers reported their best-ever Art Basel fair, which attracted a record 98,000 visitors.

As collectors, advisers and dealers head off for the Hamptons, or Provence, or other favored vacation spots, this might be the moment to take stock — or as two medieval peasants asked in a classic New Yorker cartoon, after a minstrel sauntered past singing “Sumer is icumen in”: What was that all about?

When art prices surge, there is always talk of a “bubble.” But for the moment, despite the uncertainty over Greece and despite Chinese stocks losing $3 trillion of their value in less than a month, those involved in the art market remain insouciant about prospects for the second half of 2015.

On June 30, the London analysts ArtTactic published a study based on the responses of 128 art collectors, advisers, auction experts, dealers and media commentators. More than half of the participants think the market for postwar and contemporary art will continue to grow over the next six months and less than half think it will remain flat. None expected it to contract.

“It’s not a bubble in the classical sense of the word,” said Tom Flynn, director of art appraisal at Kingston University in Surrey, England. “The cyclical process appears to have gone from the top end of the contemporary market. It’s being driven by almost unprecedented levels of wealth in the world, and by an influx of people from finance who are treating art as a pure asset class.”

In 2009, during the depths of the financial crisis, worldwide auction sales of postwar and contemporary art contracted to 1.4 billion euros, about $1.5 billion today, less than half the €3.5 billion achieved in 2007, according to a report published by the European Fine Art Foundation in March. The report said auction sales of contemporary art hit an all-time high of €5.9 billion in 2014. Or, to put it another way, no “bubble” burst in 2009; the market for contemporary art simply paused.

“There’s so much wealth around, and it keeps on being created and put into tangible assets like art,” said Suzanne Gyorgy, global head of art advisory and finance at Citi Private Bank in New York.

“The recession created opportunities for huge wealth creation,” she added, referring to the quantitative easing policies that over the past five years have raised asset prices in the United States and Europe. “Money goes to people who are able to make more money out of it.”

The Victoria Miro gallery in London, for example, represents the veteran Japanese avant-garde artist Yayoi Kusama. A 2006 version of one of the white “Infinity-Net” paintings Ms. Kusama has been producing for more than 50 years sold at auction in Hong Kong in November for $2.3 million, according to the auction results database Artnet.

Little wonder, then, that Victoria Miro had a waiting list of more than 200 clients for the four fresh Infinity-Nets, priced at $450,000 each, it took to Art Basel. These were among 15 works the gallery either sold or had firmly reserved within an hour of the fair opening to V.I.P. guests on June 16.

“That’s never happened before,” said the gallery’s co-director, Glenn Scott Wright. “People have been saying the contemporary market is a bubble for 20 years. But it’s a different beast now. So many people see art as an alternative investment.”

That said, the market for contemporary art remains a fickle beast. The speculative trade in hot, young “process-based” abstract painters such as Lucien Smith, Alex Israel, Parker Ito and Israel Lund, whose works were routinely being flipped by multiple-estimate auction prices in 2014, has cooled.

Blue-chip names like Francis Bacon, Andy Warhol and Gerhard Richter can also prove problematic. Ambitiously valued, so-so examples of these highly regarded artists’ work failed to achieve estimates as high as 35 million pounds, about $55 million, at Christie’s and Sotheby’s in London on June 30 and July 1.

But over all, contemporary art retains its allure as a wealth preservative. Back in January, the Hong Kong-based website Larry’s List calculated that there were about 8,000 to 10,000 collectors worldwide who regularly buy substantially priced works from galleries and from the major art fairs such as Art Basel.

That is a tiny segment of what Tefaf said was a world population of 35 million millionaires, and more than 200,000 ultrahigh-net-worth individuals with $30 million or more to spend, in 2014.

But with their multiple homes, tax-efficient private museums and sophisticated offshore investment plans, wealthy contemporary art collectors are people who, by and large, have managed to detach themselves from the everyday concerns of national economies. Unlike Greek shopkeepers and Chinese small investors, art magnates like Dakis Joannou and Budi Tek are in little danger of going bust.

In fact, the very rich do not seem to have much interest in collecting any other kind of art, other than postwar and contemporary. There were clear signs of the ever-widening inequality with other art markets at recent auctions in London.

Christie’s evening sale of contemporary works raised £95.7 million on June 30, and the company’s equivalent auction of Old Masters paintings raised just £19 million. Christie’s said in an email that Richard Knight, co-chairman of the Old Masters department, would be leaving the company at the end of the month.

Despite some high-value failures, Sotheby’s contemporary sale on July 1 managed to raise £130.4 million, the company’s highest total for the category in Europe.

On Wednesday, Sotheby’s auction of Victorian, Pre-Raphaelite and British Impressionist art took in £4.7 million. The auction house’s publicity department made the most of the £167,000 paid by an American collector for an 1895 pencil and white chalk study for Frederic Leighton’s much-reproduced painting, “Flaming June.”

But those results were a far cry from 2000, when wealthy individuals were buying a broader range of status-enhancing art, and the British collector Andrew Lloyd Webber had to pay £6.6 million for John William Waterhouse’s “St. Cecilia” at auction.

Still, there have been other exceptions. Though just half of the 61 lots at Christie’s £18 million “Exceptional” sale of miscellaneous historical items on July 9 found buyers, a circa 1880 wooden figural bow-stand from Congo’s Luba culture was pushed by two telephone bidders to £6.1 million with fees. It is one of just eight works attributed to the Warua Master, who worked for Luba royalty, and fetched more than double the high estimate and the second-highest auction price paid for an African work of art at auction.

A number of wealthy collectors of modern and contemporary works also have a taste for Oceanic and African art.

“This piece did have an aesthetic that appealed to a broader spectrum of buyers,” said William Robinson, Christie’s international head of world art, who would not divulge the collecting tastes of either of the telephone bidders. “It was just a spectacular piece of sculpture.”
Source: The NY Times