Conventional wisdom dictates that when wealth accumulates to a certain threshold there is a desire to start to find alternative ‘homes’ for deploying capital. This has very much been the case with the art market providing a destination for some of that alternative investment. As of late a number of art funds have emerged and there appears to be a renewed interest in art as the markets continue to disappoint. Art advisory is now an established offering for most wealth management boutiques and art indexes have also come of age and have started to look at emerging market art sales. The new indexes allow for a peek beyond New York and London to paint a clearer picture for those looking for insights into this alternative asset class with an eye on Mumbai and Shanghai (MumShang) markets.
Today an article in the FT highlighted that the Mei Moses All Art index outpaced stock market returns for two years running (beating out the S&P 500 returns). The index however is geared mostly on paintings sold in New York and London. So whatever happened to the emerged and emerging market art markets? Have these done just as well?
A look at the Indian art market is as good a place to start as any. Around 2 years back while hosting a panel on luxury in India, Amin Jaffer (Director of Asian Art, Christies) spoke of explosive growth in sales of Indian art in India and beyond back in 2010. As wealth generation continues in India as has the growth in art sales. To put things in perspective Bloomberg quoted the most expensive Indian lot to sell at Christies as that of Syed Haider Raza’s ‘Goddess Kali’ being sold for £2.4m in June 2010. Since then the FT’s Modern and Contemporary Indian Art Index is as good a place as any to see the impact that Art Funds and continued speculation in this market have had with 5K works sold over the last decade showing CAGRs (Compound Annual Growth Rates) of ‘25%, 23% and 17% for the ‘Top 25%, Central 50% and Bottom 25% price-brackets’ respectively. 50% of these sales were domestic. While Funds have the ability to create real waves in the market with large tracts of capital being deployed to purchase art in the local market the real challenge for most of these vehicles is reselling the art back into the market at elevated prices and delivering returns to their investors. This however may start to become a reality once the post crunch panic subsides and disappointing returns from conventional asset classes prompt some riskier investors to go hunting for alternatives. Unsurprisingly 2011 ended on a relatively disappointing note for Indian Art with ArtTactic’s report citing a dip in the overall confidence indicator which tracks some of the bigger ‘brand name artists’ driving the market. The top 5 in its confidence rank included Atul Dodiya, Jitish Kallat, Bharti Kher, Subodh Gupta and Rashid Rana in the May 2011 Contemporary Indian Art category. The coming India Art Fair (Previously known as the India Art Summit the re-branded IAF takes place between 25-29 January, 2012) will be an event to watch with more galleries than ever going to India to capture the Indian Art collector’s share of wallet (White Cube is amongst British galleries showcasing at the fair) and brining more foreign art to the domestic Indian market in a hit back to Indian art going abroad.
The Indian art market success story is mirrored in that of China’s market with today’s prices still being at 200% of that in 2004. According to the FT ‘China had now overtaken the UK to become the world’s second largest art market after the US with a global share of 23 per cent’. At last count sources place the number of art funds in China as high as over 70 and growing.
Insight: Governments should look to artists as valuable brand ambassadors, exporters of soft power and entrepreneurs with the ability to capture the imagination of millions. Forward looking states/governments will invest in the very infrastructure capable of refining the skills of the creative entrepreneurs and assisting them with go-to market initiatives. Much like the hoarding of certain currencies we are likely to see some states co-investing in art funds to give a boost to their own heritage/cultural assets (watch the GCC states in particular).
Insight: I see an opportunity for the establishment of a Pakistani Art Index in the near future as the sophisticated art buyer looks to better understand local market nuances and find greater value in the marketplace (Rashid Rana is a Pakistani, Lahore born artist in the top 5 contemporary Indian Art confidence rank). Indian art collectors and the international art market with celebrity collectors like Charles Saatchi have raised the profile of these artists and are driving herd buying behaviour. Local markets are also mushrooming with greater publications/reportage on the local art scene with domestic printed publications like Nukta art capturing this surge in interest and allowing for the broader art ecosystem to also benefit from the ‘rising tide’.
Insight: The number of funds looking to invest in emerging markets art is likely to continue to grow as the per capita income for BRIC and N11 countries continues to grow. Regions from LATAM to the Middle east now all boast art funds however returns by the existing funds in some geographies like India have far from delivered on expectations. Despite this banks and some corporates continue to pile money into the creation of new ‘passion funds’ in the wake of weak returns from conventional asset classes and a demand driven need for greater options to diversify client portfolios. ‘Artrepreneurs’ are likely to become mainstay as smaller funds mushroom and are able to tap/exploit under-penetrated markets.