BEIRUT: Throughout much of the history of cultural production, art has been purchased because of the pleasure it’s brought to the art lover.
More forward-thinking art aficionados patronize the work of artists whose work they admire – commissioning works, subsidizing studio spaces and monographs.
Since the middle of the last decade, however, a new trend has taken root in the Middle East art economy: Art has increasingly become a commodity, an object for portfolio investment.
The trend is linked to the emergence of the global art market in the second half of the 20th century – art fairs, biennials and the burgeoning secondary market where auctioneers Christie’s and Sotheby’s are suzerain.
Though Lebanon has formed hundreds of marketable artists since the late 19th century, the centers of the regional art market today are in the Gulf – Dubai, Abu Dhabi and Doha – where ambitious cultural infrastructure projects have seen the rise of significant fairs and lured Christie’s and Sotheby’s to set up offices.
Not everyone agrees, though, that art should be accumulated as an asset – not least several high-profile Beirut-area gallerists.
Curator, writer and art impresario Rose Issa has championed Middle East cultural production for more than 30 years. She told The Daily Star she’s seen art change a great deal over the years.
For Issa, art is still a thing of pleasure and visual enjoyment, but nowadays it has become a trendy way to obtain “a good amount of money.
“Wars influence the art market, and our region is bombarded with wars, destruction [and] lies,” she said. “So, some agendas do not allow any economic recovery, pride and healthy investment in art and life.”
Offsetting the art-as-investment trend in the Middle East is the earlier tendency to purchase work on emotional grounds, and several artists associated with Beirut – as generationally diffuse as Etel Adnan, Mona Hatoum and Ayman Baalbaki – have become art market celebrities for art-lovers and investors alike.
Nayla Kettaneh, founder of Galerie Tanit Munich and Beirut, believes first and foremost in the artwork. “Once they are trying to make an investment,” she told The Daily Star, “we advise our clientele, though we believe that anyone should buy what he likes most and not what he believes will make a larger sum of money.”
Joy Mardini, the founder of Beirut’s Art Factum Gallery, notes that art has been represented as a commodity since the European Renaissance. The moment “the artisan became an artist,” she said, “the status has been transformed.”
Two major grounds are a stake when investing in art, in Mardini’s view. One is personal and therefore more instinctive.
“I go to a gallery,” she said, “I like [a work], I purchase it and I leave.”
Financial motivations are less instinctive. Mardini referenced a study “on how much the artist used to be worth, how much he is worth now and how much he will be worth in the future, and if it is necessary in relation to the investment strategy.”
Recent studies have shown that – regardless of whether one is moved by art – an increasing number of blue-chip investors have come to view art as a way to diversify their asset portfolios. Fine art is something in which you can invest, just as you would the stock market or financial securities.
The 2008 subprime crisis and the attendant defaults of major corporations were only extreme examples of a cyclical and inherently combustive financial market. Traditionally, investors have sought shelter in precious metals, especially gold.
More recently investors have started to look past gold in favor of art, whose stable and constant growth they find appealing.
In 2013, the global art market was estimated to be worth approximately $65 billion. Any growth of the market is rooted in the systemic insecurity of more conventional facets of the international market.
The psychology behind art investment was taken up recently in Barclay’s 2013 wealth and investment management study “Motivations Behind Treasure Trends.”
The study found that almost “two-thirds of the treasure trove owned by respondents is held primarily because of the pleasure that it brings them. ... Owning treasure can also be a social activity ... [and] some wealthy individuals may acquire treasure for its heritage value,” which can be tax exempt.
Barclays recommends investing in art as it “protects against inflation and currency devaluation and provides returns that are uncorrelated with those in the main financial asset classes.”
Founded in 2001 by Philip Hoffman, the Fine Art Fund Group looks at art purely from an investment perspective.
Hoffman, who is FAFG’s chief executive, explained that individuals seek diversity in their investments. “They want a very wide distribution of assets and are looking to put a proportion of their wealth into categories of alternative assets like art.”
That said, Salma Shaheem, FAFG’s head of Middle Eastern markets, told The Daily Star that passion was sometimes a guide rope for collectors.
“In the Middle East, it’s in our culture to have carpets, crafts and antiques,” she said. “However, there is an understanding now of art as an alternative investment.
“An investible piece will increase its value with time, given that art is considered a long term investment,” she said. “ You can take your Picasso and it will have a dollar value, a yen value, and sell it all over the world.”
Beirut Art Fair founder Laure D’Hauteville sees many virtues in art as an investment, though “its profitability depends on many criteria, the most important one being if the artwork is contemporary.”
For Shaheem and D’Hauteville, the virtue of art is that – unlike real estate, say – it is moveable, and so can accrue value whenever and wherever.
Hedge fund managers and the creatures of the commodities market may wonder why artworks can’t simply be regarded as emotion-free objects of profit and loss.
Art investments are not here to “replace your traditional portfolio,” Shaheem said.
It is a different way of investing that can lighten risk. Amassing a personal art collection is one thing, but art investment means assembling a portfolio of works by different artists, from various regions and periods.
The question remains, how does an aspiring art investor know who the trendy artists are, what type of art is investment-worthy and how to access it. There must be indicators enabling the investor to analyze and evaluate the artists and their works.
Sotheby’s plays a major role in this. The auctioneer’s objective, Aileen Agopian told The Daily Star, is “to give a global vision of contemporary art.”
An international contemporary art specialist and Sotheby’s co-head of contemporary sales in Doha, Agopian said that, like FAFG, Sotheby’s role was to pay “attention to what artists are showcased, what artists curators are concentrating on.”
Not all art is an appropriate object for investment.
“Is the artist rare or going to be rare?” Shaheem said. “Who is the gallery representing the artist? Are they continuing to work the one with the other or is it short-lived? Is the artist recognized as important?”
Aspiring art investors should take such questions into consideration. They will be of less interest for those who simply admire the creativity that underlies the work.