A growing class of super rich
collectors — many from Asia, Latin America and the Middle East — is putting
money into fine art both to gain status and to invest in something new.
By Alana Semuels
December 8, 2013, 5:00 a.m.
NEW YORK — The painting once
hung in the Cleveland Museum of Art. And there was no shortage of people who
wanted it in the crowded Christie's auction room.
The artwork, "Women
Reaching for the Moon," is a blur of a woman in a red dress. It was
painted by
Rufino Tamayo, the famed
Mexican creator of abstract works that combine European and Latino influ-
ences. Though bidding started
at $500,000, it quickly reached $1 million. The standing-room-only crowd
murmured as auctioneer Adrian Meyer parried with the remaining bidders, and
workers wheeled in rows of extra chairs.
"Look at the painting, at
least face it. You still have a chance," Meyer said to a woman in the
audience who had been bidding, as the price went up to $1.2 million. "For
$50,000, it could be yours."
When Meyer finally knocked his
hammer against the lectern, signaling that the painting had sold for $1.2
million, "Women Reaching for the Moon" became the most expensive work
to pass through Christie's for the evening. The auction, held two weeks ago,
was part of Christie's biannual sale of Latin American art.
But it was not the most
expensive to be sold at the auction house this season.
In October, Christie's sold a
triptych by renowned British figurative painter Francis Bacon for $142.4
million, a record price for a painting at auction. The auction house also set a
record for the most expensive work by a living artist when it sold a steel
sculpture, "Balloon Dog" by American contemporary artist Jeff Koons,
for $58.4 million.
Economists may still be worried
about consumer spending as the holiday season approaches, but if the art market
is any indication, the world's wealthiest have lots of money to spend.
As small groups of people get
richer in various countries across the world, observers say, they're putting
money into art both to gain status and invest in something new. Many have never
put their money into art before.
"What we're seeing is that
wealth is expanding in Latin America and the Middle East," said Phillip
Hoffman, head of the Fine Art Fund Group, which consults with wealthy clients
who want to buy art. "The new rich like to enjoy art, show it off, have it
as an alternative asset."
Hoffman's company is 30 times
bigger than it was three years ago, he said, as more wealthy clients become
interested in owning art. He has 120 clients — most from Asia, Europe and Latin
America — who have never owned art before. In fact, one of them dropped $67
million on two paintings.
About 3% of the world's wealthy
now own art, but Hoffman estimates that figure will grow to 30% to 40% in the
next decade.
Art as an investment really
didn't come into vogue until the British Rail Pension Fund, which had begun
acquiring art in the 1970s, began to divest of its artworks, said Barbara
Guggenheim, of the art consultancy Guggenheim Asher Associates. The sales,
which mostly occurred in the 1980s and 1990s, netted tens of millions of
dollars for the fund, leading to an 11% return.
"For the very first time,
Wall Street had something very concrete to look at as a model," she said.
"And Wall Street loves graphs."
The global art market is now
worth about $60 billion.
These days, though, it's not
just art. Wary of losing wealth in the shaky stock market, the super wealthy
are also putting money into alternative investments, such as classic cars,
wine, gems and watches. Sotheby's sold a giant flawless pink diamond for $83
million in Geneva last month, the highest ever paid for a gemstone at auction.
But as sales of other luxuries
including high-end condos boom, art can go hand in hand, said Martin
Friedrichs, assistant director of the Hollis Taggart galleries on New York's
Upper East Side.
"There's a boom of
high-end condos here, and people need something to put on their walls," he
said. "It's much nicer to hang a piece of art than a printout from your
online brokerage account."
These kinds of high-end
investments have been surging as the number of millionaires around the world
has increased dramatically in recent years.
According to Wealth Insight, a
British firm that tracks global wealth, the number of millionaires in China
grew 90% between 2007 and 2012. The number of billionaires in that country grew
400% from 2008 to 2012. And the number of high-net-worth individuals in the
Asia-Pacific region grew 29% between 2007 and 2011.
Chinese buyers bid heavily for
modern art: Picassos, for example. But Hoffman said they've also begun to
invest in Chinese antiquities.
Growing wealth among the rich
in Mexico has led to more competition for Mexican and other Latin American art,
as collectors with more money begin to buy works by artists from multiple
countries.
In Mexico, the number of
millionaires grew 32% between 2007 and 2012, according to WealthInsight. There
were 145,000 millionaires in that country by the end of 2012, holding $736
billion.
"We've seen in the past
five to seven years clients who did not exist before who are buying quite
heavily," said Gabriela Lobo, director of Christie's Mexico.
That's driven up the price of
some Latin American artists who barely sold at all a decade ago. At the Latin
American art auction, a painting by Austrian-Mexican artist Wolfgang Paalen
sold for $200,000; pre-auction estimates had valued the painting at $40,000 to
$60,000.
"Some of these things, we
couldn't give them away, or we'd sell them for nothing," Lobo said.
"Now there's a bigger market for these names."
Diego Uribe flew to New York
from Miami for the Christie's auction with his wife and bid on a work by Carlos
Cruz-Diez. They were outbid. Two out of three of the works for sale by the
Venezuelan artist sold for tens of thousands more than Christie's top
estimates.
"You have to have a
budget," Uribe said.
Still, he wishes he'd been able
to walk away with something.
"It will get more
valuable," he said.
It's still not clear whether
art is actually a smart investment, especially since the market is considered
opaque because many deals are done in private. This puts even more value on the
public auctions to gauge how art might be appreciating or depreciating.
"There are periods where
art outperforms equities and periods where it underperforms, but the important
thing is that it has a low correlation with equities," he said.
From 1987 to 2012, the Mei
Moses World All Art index showed an average annual return of 5%, while the
Standard & Poor's 500 index added 9.6%. Over 60 years, the art index showed
average annual returns of 9.5%, while the S&P was up 10.3%.
But for many super rich with
extra money on hand, it doesn't matter whether the artwork becomes more
valuable or less. They like to look at it on their walls, regardless of what it
costs.
"We don't buy to sell, but
we know it is going to be an asset," Uribe said. "But if it loses
value, I don't care."
alana.semuels@latimes.com
http://www.latimes.com/business/la-fi-art-market-20131208-
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