First of all, it must be noted that art as an investment should not be compared to such traditional investment assets as securities or debt instruments – art has its own specifics, benefits and drawbacks. This asset may be used to diversify the investment portfolio and mitigate investment risks. In addition, it is usually a long-term investment with no annual dividends. Art also lacks liquidity as opposed to gold, for instance. The market for art as a whole, without doubt, is growing, however making forecasts using only economic instruments would be inappropriate.
The economic crisis and recession that followed, judging by the number of sales on the biggest auction houses throughout the world, did not have negative impact on the art market. Indices of the art market, calculated on the basis of average sales figures, demonstrate that during the recession dips the art market was on the rise. A fall in sales in 2009-2010 was rather quickly compensated by a period of active growth, and relative indicators (from the beginning of index period) still demonstrate a tendency of positive growth.
For those investors, who would like to make an investment into art objects, who at this stage have available liquid funds and who are prepared to “play a long game,” the forecasts for the capitalization in the coming years are quite attractive: for example, capital growth for investments in contemporary art is expected to reach 15-20% within 3-4 years. However, this begs the reasonable question: is this forecast equally applicable to classical art? In order to be confident in the investment decisions, it is important to receive the support of qualified experts and be mindful of the fact, who is the operator in the given market.
As commercial investments, classical and contemporary art are significantly different in terms of risk and profitability. The former generally has lower profitability, but also lower risk. The latter, at times, demonstrates exceptionally high profitability, however the accompanying risks are much higher as well. Contemporary art is more dependent on the operator – that is, the gallery, which promotes a particular work of art or a particular author. Here, as a rule, the most profitable combination is “a good author coupled with a good operator” (that is, gallery or promoter). The successful combination of these two factors determines the success of the investment. For example, I am very fond of the contemporary Russian sculptor, graphic artist and jeweller Dashi Namdakov, who was previously featured in “SPEAR’S Russia” and whose interests as of 2011 are represented by a famous London-based gallery Halcyon Gallery, which was founded in 1982 and is considered to be one of the leading centres for world renowned contemporary art and its collaboration with many famous artists. In recent years Mr. Namdakov held over 15 personal exhibitions in the world’s largest museums, including the State Tretyakov Gallery and the State Museum of Oriental Art in Moscow, the Tibet Culture Centre in Tibet House in New York City, the Beijing World Art Museum and the Guangzhou Art Museum in China, and the A.Kasteev State Art Museum in Almaty, Kazakhstan.
Last year we developed for our clients an investment product which finances the art of Dashi at its early creation stages. Through this product the investor provides the author with necessary capital to enable him to produce work, and to focus his talent on the creative side of the production, as opposed to its capital raising needs. Dashi can be considered as a very successful commercial project. He occupies his own segment of the market and has his own range of potential buyers. Dashi’s works rarely leave people indifferent: his artistry is either admired or not understood, but everyone recognises the originality of his talent.
Market is what determines success of any author, and, in my opinion, today the works of Dashi are undervalued. Compared to the works of better known sculptors, the works of Dashi Namdakov are inexpensive. Counting “quantity-to-value of bronze” the works of the Colombian artist and sculptor Fernando Botero, whose collection was recently auctioned off for US$7.5 million, cost much more. From a capital investment perspective, Dashi’s works are of interest irrespective of the aesthetic preferences of the collector. One must note the rising interest to Dashi’s works in China, where his works are exhibited and beginning to attract the interest of investors. Halcyon Gallery will soon exhibit his works in Shanghai – Asian motives in Dashi’s work have found a special appeal and resonance with the local public. Therefore, it is sensible to consider Dashi’s art works as possible investments by the Chinese investors, with their rapidly growing capital and appetites. After Russia, China is the main market for works of Dashi Namdakov. At the same time, Europe, and London in particular, with its mix of cultures, is also showing interest in such works. In March 2012 Oracle Capital Group in partnership with Halcyon Gallery presents the installation of Dashi’s monumental sculpture “Ganghis Khan” on Marble Arch square in London, and sponsors a large exhibition of his works in May.
The price range for Dashi’s work is rather broad – from tens of thousands US dollars to millions. It must be noted that currently there is an opportunity to purchase his works at a relatively low price. One must keep in mind that the price for his works continues to grow at a fast rate. In the past 10 years, through the introduction of the commercial component (such as advertisement of his works and partnership with galleries) – the price for his art increased by 3-4 times.
In terms of popularity, his sculptural works are have the largest following. His graphic works are potentially interesting to investors, as well, but at the moment they cannot be considered an investment asset. It is worth drawing the attention to his miniature sculptures with precious metals and stones – this is a different product, covering different segment of the market, but they also have investment potential. The works of Dashi are owned by a large number of collectors, among them are famous politicians, businessmen and artists. His works are actively purchased and given as gifts: many consider them an investment for the soul.
Art as a whole is a very personal question for every investor. If you are investing funds into shares or bonds this is a purely financial transaction and shall not coincide with any emotional attachment. As for art, there is a emotional component involved. This is exactly what can trick an investor into making an insensible decision! At the same time a person, investing into the assets that he enjoys, receives great pleasure from being able to own and enjoy the work of art every day. An investment in art shall be truly successful when we receive aesthetic pleasure from owning an asset, being confident that the object of our admiration will grow in price.
Semyon Dovzhik
Oracle Capital Group
