Wealth Journey Newsletter Spring 2019

26 Sep 2019

Art as an investment option

Consider this for a second, a well recognised and traded asset class that can resist a stock market crash, fake news, trade wars, service delivery protests and junk status. What if that asset class can also help to build pride among communities and countries, telling stories, in vivid colours or not, painting a clear picture of the temperament over the ages and how the artists saw themselves, and the world? The history of art provides an opportunity to discover how previous generations lived. From the Stone Age cave paintings of fertility goddesses to the warrior art of Mesopotamia, Egyptian art of pyramids, Greek idealism of perfect proportions, Roman realism, the Indian/Chinese serenity, all through to modern and post-modern art, it tells us more about our history.

Art travels very well. And we're delighted that the advent of democracy has improved the governance, protection and security around it. What this means is that art will now tell a more accurate history, being as close to the source as possible, or being owned by someone whose agenda is not to rewrite history, but to conserve it.

In the past, the wealthy used to commission art pieces for their homes. When these became huge collections, they even built homes for them. These homes turned out to be art conservatories, and we have a lot to thank them for. Today, this practice continues across the world, with architecture and art still intertwined as in the time of Michelangelo. The best art becomes more valuable over time. However, even King Louis XII of France could not have imagined that Leonardo da Vinci's masterpiece Salvator Mundi, a painting he commissioned in 1605, would one day be the most expensive in the world, fetching US$450 million!

LOCAL ART

South Africa boasts the 4 000-yearold rock art by the San (Bushmen) hunter-gatherers, which is the richest collection of rock art in Africa. Due to this collection, UNESCO inscribed the Drakensberg as a mixed natural and cultural world heritage site in the year 2000. In the early colonial era, the amazing visuals of abundant flowers and plants, people and landscapes were captured to send back to families overseas. A more engaging form of art came to life at the end of the 19th century. The rise of the apartheid era brought with it new story-telling and this was the time that South African art was at its most diverse, though segregated, which gave rise to underground resistance art. Democracy brought with it an open-minded view that started to look at crafts as art. This movement is still growing and is hopeful in its inclusion of all forms of art.

African art makes up only about onehundredth (R12 billion) of the global art market value, with South Africa holding R5.5 billion of that.

According to the 2018 South Africa Wealth Report, in South Africa, art has moved from being a hobby to an alternative investment class which is growing fast. Over the past 10 years, fine art prices have increased 28% outstripping global prices, which have recorded "only" 12%. This is because of rising interest in this type of investment as well as the growing number of high-net-worth individuals at a steady pace of 8% in 2017.

ART AS A RESILIENT INVESTMENT

The attractive returns on art over the last few years have outperformed many other investments and the art market has become an independent, efficient and a liquid market on all continents. Along the way, art has proved its resilience, resisting the fallout from global political and economic crises, such as 9/11 and the financial crash of 2007/8.

There has been a rapid increase in the art-buying population and a significant reduction in the average age of market players, including buyers. The emerging markets have caught the theme, as art has expanded into Asia, the Pacific Rim, India, Africa, the Middle East and South America.

PERFECT FOR A LEGACY

Considering that leaving a legacy is one of the key objectives for most wealth clients, an art collection is a perfect fit.

FUTURE-FIT

As with everything else, social media has a huge influence in terms of what art is currently growing among the youth. Instagram, with almost a billion followers around the world and the younger generation sharing their art including food, music and fashion design, has become the next frontier for wall art. Even though graffiti art advertising is mostly seen in the United States and Europe, the rate of sharing on Instagram and other social media platforms means that the East and emerging markets are catching up. In addition, the fact that the average age of current buyers is decreasing signals sustainability for this investment form.

In this fast-rising market, internationally renowned South African artist Sonny is the best example of a wall artist. He creates large-scale paintings of endangered wild animals to raise awareness and funds for the environment and sustainability. Sonny has painted murals in New York, London, Canada, Russia, Miami, Ireland, Amsterdam and South Africa. He donated R215 000 - a percentage of his sale price of To the Bone artwork from his sold-out solo exhibition in New York.

Sources: Knight Frank Wealth Report 2018, Business Insider, www.art.co.za, @sonnysundancer (Instagram)

Download the Spring 2019 newsletter

Content by:

OM Wealth