The end of art as an asset class

By Felix Salmon
April 2, 2009

UBS recently signed on to continue as lead sponsor of Art Basel through 2011. Oops. Maybe that wasn’t such a smart idea, given that it’s just closed down its entire art-advisory division.

UBS was always well placed to be the last man standing in the inevitable shakeout of art-advisory departments in investment banks. It had the most rich clients, and it invested by far the most money in pushing itself as the only bank which could manage both dollars and Diebenkorns. So this announcement is pretty shocking — but also a little heartening, to those of us who love art for its intrinsic rather than its monetary value.

Maybe we can date the top of the market to the 2007 pronouncement by Tobias Meyer of Sotheby’s, who said that “the best art is the most expensive because the market is so smart”. Of course the art market wasn’t the only market which ended up proving to be rather less intelligent than its participants had believed.

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Comments
3 comments so far

Art has always been the possession of the rich. Throughout the ages, rich people, large organizations and monarchs have been the purchasers and holders of the greatest art. In our day and age, we are lucky to have museums that buy art for all of us and display it in public places where we all can experience it. The middle classes, we have to be satisfied with museums and the meager pieces of art we can afford. Thank God there are people rich enough to buy and preserve Van Goughs, Rembrandts and Michaelangelos that may some day again be lent to museums for our benefit.

I don’t hate rich art owners, I’m glad someone is there to love and protect the great art I love but can’t buy for myself!

Posted by Jenna | Report as abusive

Some commentators may argue that there has never been a better time to buy art. Like all ‘Markets’ the Art world has not been immune to the Global Financial downturn. As investors sought alternative ways in which to ‘hold’ their money Art was seen by many as a more positive tangible asset. Stock receipts don’t have the same aesthetic appeal as a good quality oil painting and besides Art makes for better dining table conversation. Then there’s the Kudos of having a great work of art by a globally recognised artist. Think how many banks have great works lining their corridors. Some may say holding great art is viewed as a symbol of success itself; – greatness by association. Yet these works are the works of man and as we know by history, great men are not always wise, and therein lays the problem. Do we appreciate this art because of its monetary value or by the works tangible aesthete? Mothers will tell you the colourful scrawling hangings on their kitchen walls made by their two year old are the greatest things on the planet, art critics may disagree. It’s the personal view that counts, we are free to agree or disagree and this remains subject to our own personal tastes cultural or otherwise. What is becoming more evident is the abandonment of more modern works onto the books of international auction houses. These pictures and prints may have held previous sway in a more frothy market but as declines are inevitable in a falling market so too does the expression of ownership over these chattels. Appreciation returns as the flavour of the month. I don’t care what its worth, the real question is, do I like it? As individuals and corporations are forced to sell works of art to raise capital the level of quality works coming to market increases. The lesser works stand out from the best of the rest and it becomes easier to determine true greatness from imagined contrivance. I will be investing in art now that the market has returned to it’s ‘senses’ and I hope to bag a bargain at the same time. Most importantly of all I will have something I genuinely favour, for there can be no truer critic than oneself.

Posted by Charlie Balmforth | Report as abusive

Lets not confuse UBS’s Business practices and operating losses with the death of ART as an asset class…
Art has always been an alternative invesment,and a great way to protect the value of currencies and hedge against inflation.
Other than the liquidity issues in dowm markets, which might be unavoidable.. it always has rebounded and caught up ..
it all depends on what you buy….
I would predict that for the next few years Chinese Contemporary Art will become the next haven for the Chinese, .Although the storm of collecting Chinese Contemporary art started with Europe, it now has rightfully gone back to the Chinese who are now starting to collect and are beginning to understand and catch up with there own art history…..

Its a matter of time that Chinese Contemporary art will have fully caught up to western prices…. with their collecting base outnumbering europe and the west.
In the short term—the next 12 to 18 months—there will be good opportunities to buy works by top-tier artists in both painting and photography. By top-tier, I mean the 40 or so who have gained art-historical recognition, have been internationally exhibited, and are being acquired by museums in the West as well as Asia. Historical works by these individuals—the first generation of Chinese contemporary artists, from 1989 through early 2000s—are relatively scarce and will continue to gain value. The global downturn has yielded some attractive pricing, particularly in comparison to top contemporary artists in the West, creating smart buying opportunities. In fact, art funds focusing on Chinese contemporary art have been formed to take advantage of this moment. Museums are also acquiring for their collections.

Chinese contemporary photography is a buying opportunity. It’s still undervalued relative to painting, which was the focus for collectors for many years. Quality works will become increasingly scarce, particularly as China develops as a consumer society with its own collector base. The Chinese audience with disposable income is growing, and a consistent percentage of those people will become art advocates and collectors.

The Chinese economy may be slowing down, but it is not in a recession. China will remain among the world’s most attractive investment destinations, and art will continue to parallel this direction. The result is that Chinese contemporary art will weather this economic downturn and will come out as an even stronger player.

Posted by ellie | Report as abusive
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