Saturday, October 17, 2009

The New Art Market begins to take shape

We're nearing the end of Frieze week and the temperature seems to have risen slightly on the international art thermometer. Is the art market finally de-frosting after a year in the ice box?

As usual, the press has been somewhat preoccupied with the presence of Gwyneth Paltrow, David Furnish and their ilk at Frieze Fair's champagne private bash, but unless these celebrities are buying their Martin Kippenbergers and Peter Doigs in the full glare of the media, we need more than a bit of idle star-watching to gauge the progress of recovery.

Earlier in the week, I attended an Art Markets Symposium in South Kensington organised by Deloitte's Luxembourg office. This was another of those occasions when the world's leading art investment fund managers assemble to exchange Delphic anecdotes about 'volatility projections', 'eclectic asset allocations' and 'correlation analyses' while I sketched a passable version of Delacroix's Death of Sardanapalus on the back of my conference pack.

Many art market watchers believe the art market bubble that finally burst at the end of last year had been inflated over the previous few years by the presence in the market of speculators from the financial sector. These barbarians, the theory goes, had pitched their tents in the last great unregulated market (or what one fund manager at this week's conference pithily described as "a completely unconstrained, non-benchmarked space"), before embarking on an orgy of arbitrage and unabashed 'flipping'.

Some would have us believe that the 'correction' we're now witnessing has brought a return to some Edenic place from which the 'flippers' have finally been expelled. Those buying art in the current climate are buying it for the love of art, not because they think they can make money on it. New York dealer Marianne Boesky told Bloomberg this week that "Last year was so rough at Frieze," but this year, "It's real. There's no hype or depression. We’re now selling to people who just love art."

Surely if it were only "art lovers" doing all the buying there would be no art market. And weren't the dealers who are now luxuriating in 'the real' only too happy to sell to the hordes of barbarian speculators during the years of milk and honey from 2003-2008? Yes, they were.

With Goldman Sachs preparing to pay out $5.35 billion to its staff in quarterly pay and bonuses following a spike in profits, there is every chance that the 5,500 Goldman Sachs employees based in London might just decide to channel some of that wealth towards art. Here we go again, is the phrase that immediately springs to mind.

If you thought the last art bubble was bad (incidentally, the Mei-Moses art index defines a bubble as a trend of 30% growth per annum for five years), the Deloitte conference offered plenty of signs that the international art market may already have entered another phase of growth. This time it may be driven by a different range of derivatives and similarly exotic instruments aiming to capitalize on the market's traditional lack of liquidity. So while dealers over at Frieze were celebrating the return of the real, elsewhere plans were already afoot to construct the next virtual market. Once again it will be a market powered in no small measure by debt funds and hedge funds.

Another tent-pole trend emerging from the Deloitte conference was the emergence of a new breed of 'eclectic funds' that seek to spread risk across a broader range of what are now commonly termed "emotional assets". So, diamonds, stamps, coins, watches, and so on, will increasingly be included in investment portfolios along with (or indeed perhaps instead of) fine art. According to Bernard Duffy of Emotional Assets Management & Research (EAMR), recent studies have demonstrated that by diversifying into a broader range of 'collectibles', volatility profiles can be projected more efficiently and returns predicted with greater accuracy.

Meanwhile, one trend that is proving somewhat tougher to predict is the future of the auction houses, particularly as buyers and sellers seek increased privacy in their transactions and as the global art market continues its seemingly inexorable shift from West to East.

The art market's traditional need for discretion and the low cost of private transactions (compared with the terrifying cost of selling via the rostrum) has already triggered an exponential growth in the number and value of private sales conducted by the auction houses. Christie's executed £133.1 million ($217 million) in private sales in the first half of 2009, while Sotheby's transacted $1.5 billion (£917 million) in private sales over the last three years, according to a Bloomberg report.

So, while I wasn't actively scouting around for a visual metaphor to illustrate these musings, Frieze fair provided one.

As I exited the big tent on Thursday, I spotted a video work by Christian Jankowski entitled Strip The Auctioneer (right). This involved an elegantly dressed auctioneer selling his own clothes, item by item, at a Christie's public auction. The sale actually took place at Christie's Amsterdam in June, but I'm disappointed to have to report that the auctioneer failed to strip fully naked, apparently stopping after he'd taken off his trousers.

Whether this failure to get all of his kit off represents grounds for an appeal under the Trade Descriptions Act is a moot point, but I couldn't help wondering whether the auctioneer might have gone a bit further had he been selling via a private transaction. The last object he sold was his hammer. If that's not symbolic, what is?

Thursday, October 15, 2009

'No Love Lost' between Hirst and his critics

I was at an art investment conference yesterday at which one of the delegates shared an amusing and illuminating story about the artist Damien Hirst. It concerned a collector who had purchased one of Hirst's butterfly paintings for a large amount of money (it would have been between £500,000-£700,000). Some time later he was perturbed to see that several of the butterflies had fallen off the canvas on which Hirst (or more likely one of his army of assistants) had suspended them.

Clearly aware that he was in possession of something with a very limited shelf life, the collector promptly went out and found a few replacement butterflies and attached them to the spaces vacated by their predecessors before entering the work into auction. The bidding started high — £600,000 (no bids), £500,000 (no bids), 300,000, 200,000, and so on, before being knocked down for some paltry sum. It was said that Hirst bought the work, repaired it himself (or more likely got one of his army of assistants to repair it for him) and then re-sold it for somewhere rather closer to its original price.

Whether or not this story is true, it does illustrate something about the Hirst mythology — that given that he doesn't actually make the works, he is now recognized primarily as a businessman (it's no surprise that this anecdote was told by an art asset manager at an art investment conference).

But perhaps that is what Hirst will now be restricted to doing — repairing the mixed media and collage-based works for which he has become famous and which he recently declared he had finished making altogether in favour of a return to painting (see my preview of his current Wallace Collection show here).

It seems that Hirst, ever the clever reader of the market and his critics, might have expected the merciless critical deconstruction that his paintings have received from the art press. The title of his Wallace Collection show — No Love Lost — may have been a subtle signal that if the critics ravaged him, there would be no love lost between him and them.

It's easy to take a pop at the guy. He's the richest artist that ever walked the planet and the critics and commentators just can't forgive him for clearing £100 million at Sotheby's in a single auction on the very day that Lehman Brothers evaporated. It may be true that he can't paint. It raises the interesting question: "What will he do next?"

The critics get the knives out:
It couldn't get worse for Damien Hirst (Telegraph)

Are Hirst's paintings any good? No, they're not worth looking at (The Independent)

Damien Hirst's paintings are deadly dull (The Guardian)