Collecting for Love or Money? That is the question
The TEFAF closed its doors and a successful jubilee it was. With 72,000 visitors crossing the threshold - of which 238
museum curators, 360 private jets flying in and an encouraging number of buyers from Russia, China and Hong Kong,
the hope is that it was also a commercial success for exhibiting dealers.
To celebrate the 25 TEFAF Jubilee the fair organiser had organised an number of activities of which one was the
TEFAF Art Symposium, titled “Collecting for Love or Money?“, held on the day the fair opened for the general public.
The opening talk was by Dr. Clare McAndrew, art economist who for the last three years compiled the renowned
TEFAF art market report and the proprietor of ArtsEconomics. She presented a compilation of her report, covered
market trends over the last 25 years and gave an outlook of what the art and antique trade may expect and the
impact this could have. In 2011, 80% of gallery sales were € 50,000 and less and only 3% of art sales exceeding €
500,000, the USA is no longer the major stakeholder in the art market and has been surpassed by China that now has
a 30% share. An impressive accomplishment because in 2006 China only had a share of 5%. The Chinese market is
predominantly a domestic market of which a staggering 70% of the total sales are generated by the auction houses.
The last 25 years have shown an immense increase in size and sales volume, this is due to the globalisation of supply
and demand and, of course, the development of internet. The market has furthermore developed into an eventdriven market were art fairs are growing in numbers and thus playing a more important role as a point of sales for
art and antiques, substituting more and more the physical shop front, which is now in decline.
Other changes are that auction houses have adopted new business models and besides auctioning also function as
retailers. Parallel to these developments are art consultants acting as up and rising sales mediators.
As will be confirmed further on during the symposium, Dr. McAndrew states that there is an increasing demand for
art as it is considered a valid investment alternative.
The report ‘Observations on the art trade over 25 years’ is basically an essential read for the serious collector and
aficionado with an above average interest in the arts. The report can be ordered through the webshop of
www.tefaf.com.
Prof. Rachel Pownall, Associate Professor of Finance at Tilburg University, gave us insight in the emotional values. An
example, which caused a grin amongst the public, was the positive effects the weather had on stock prices. Through
academic research, the effects of weather conditions were proven to effect people in their decision making. Gloomy
weather in a negative sense and sun flooded days positively. In a nutshell, the message of the lecture was that
positive emotions affect our optimistic judgement.
Fabien Bocart, Quantitative Research Director at Tutela Capital, a company specialised in producing analytical tools
and investment strategies in the art market, presented some interesting observations. Based on the historical
volatility of the market they can predict to a certain extent the possible gains and losses a collector is subject to. Two
examples are the analysis of Canaletto and Andy Warhol.
Example: Canaletto (Yearly volatility of returns of an investment in Canaletto: ~21% )
Sources: Tutela Capital SA
Example: Andy Warhol (Yearly volatility of returns of an investment in Warhol: ~34% )
Sources: Tutela Capital SA
For collectors and investors the question is how to minimize risks and maximize returns. The road to follow is
compare and analyse relevant data, be it on a professional level through quantitative tools or good old fashioned
pen and paper. The second step, a great difficulty for passionate collectors, is to diversify, as diversification leads to
fewer risks. The pie charts here below are illustrative.
Sources: Tutela Capital SA
Sources: Tutela
Capital SA
Wrapping up his lecture, Fabien Bocart concluded financial risks and rewards are to a certain extent manageable.
One of the very few certainties, as he announced in his opening is the ‘discovery’ that price in the art market goes up
and down! More controllable are operational hazards which can be covered by, for example, insurance policies.
Financial risks can be managed by a market analysis, diversifying and selling at the right moment in order to manage
any liquidity risks. Finally, he stated that the art market is the only market that is immune against bankruptcy!
Panel Discussion
After a short coffee break there was a panel discussion on the subject of the symposium’s title, moderated by
Annabelle Birnie, participating attendees were J. Patrice Marandel (Curator at the LACMA), George Kremer (private
collector), Phillip Hoffman (Chief Executive of The Fine Art Fund Group), Fabien Bocart and Xavier Auerbach (tax
partner PwC).
Phillip Hoffman had an interesting statement in which he claimed that the arts is the only commodity which actually
does not devaluate, which is confirmed to a certain extent through Fabien Bocart’s previous presentation. To be
noted is that a clear distinction was made between investing and speculating. Speculating being the financial gamble
commonly seen when art bubbles are created, especially with contemporary art. To top it off, George Kremer was
more than convinced that a great number of contemporary artists will be completely forgotten in the 50 years to
come. In 2009, Ben Lewis, art critic and filmmaker, made an interesting documentary title ‘The Great Contemporary
Art Bubble’, which gives an excellent insight how art bubbles are created.
One should not buy art when one wants to establish a collection, according to J. Patrice Marandel and George
Kremer. J. Patrice Marandel strongly advises to start off with collecting books about the art one has a soft spot for
before purchasing the first work of art. George Kremer stresses that educating once self is the all essential start of
every collection. Books, lectures, museums, collectors and of course the trade, are the sources to consult before
compiling a serious collection.
The overall conclusion to the question whether to collect for love or money can be none other than that it depends
on personal motivations. Phillip Hoffman, the only non-collector amongst the panel members, states he is in it for
the money in order to give his clients the best return on their investment and that the emotional value is
nonexistent. J. Patrice Marandel and George Kremer obviously have different motivations and value the art they
acquire on a more emotional level.
Conclusion
The symposium presented some very interesting insights, was more than worthwhile attending and will hopefully be
a reoccurring event. Establishing a collection should require a bit more than just financial funds, whether ascertained
for emotional reasons or from an investment perspective. Prior to developing a collection, one should be informed
of market trends, price developments and obtain knowhow of the discipline(s) one wants to focus on. From a pure
rational point of view, if collecting is ever a rational occupation, diversifying is financially the safest way to go,
according to Fabien Bocart.
Boudewijn Meyer
Kunstpedia Foundation
Curators of art knowledge