"Art provides the world with a sensory experience like no other."
An investment banker was having tea at his family’s lakeside house in Russia one gloomy November afternoon in 2008, when a neighbor dropped by, upset, and visibly exhausted by the ongoing liquidity crisis in Moscow. Declining tea in favor of a deep shot of whiskey, the neighbor proceeded to tell the banker that he failed to sell his chain of children’s clothing stores to a private investor. The investor, one of Ukraine’s wealthiest businessmen, had, in the neighbor’s words, gone “totally insane.”
Knowing there were numerous deal opportunities available, the banker was surprised and asked why the deal failed.
“I was surprised too,” the neighbor responded, helping himself to another shot of whiskey, “until I heard the reason.” He put his drink down and looked at the banker with eyes brimming with anger. “This guy is totally crazy about art and has spent over $100 million on some sharks and bulls in London on the day Lehman Brothers collapsed.”
The neighbor’s look begged a sympathetic response. The deal for his stores involved a mere $10 million. The liquidity crunch had forced him to either sell the firm or face bankruptcy under the pile of debt he had accumulated. He couldn’t understand how, given the current condition of the global economic meltdown, someone could withdraw his investment offer and focus on art.
“How can art sell for nine digits, and more than my company?” the neighbor asked.
“Why not?” the banker’s wife replied. “It’s nice, and someone has the money.” The banker’s wife betrayed her belief that rules were meant to be broken and that everything was possible.
The neighbor refused to let it stop at that. “It generates no cash flow, has no liquidity, and there’s no one else on earth who would pay that kind of money again. This is silly.”
The banker’s wife smiled and said, “Well, you’re the ones in finance, not me. It’s not the first time it happened, and I don’t think it’ll be the last. So, who is silly now?”
The banker’s wife was right. Art is not silly. Art is big business. The global art market reached an estimated $63.7 billion in 2017 and experts are predicting growth to continue.
The Philippines is following suit. Although a small player on the world stage, the digital age is seeing the globalization of art—broadening the Philippine’s reach and reputation as a serious player. The art market is more accessible and transparent than ever before and global investors are taking note.
Art is widely regarded among investors as a great portfolio diversifier. Its low correlation to stocks, bonds, and real estate makes art a valuable insulator, a store of wealth, and a great hedge against inflation. It also offers the rare benefit of “tangible pleasure” or “psychic income” as you hold. The key to a successful and profitable art portfolio is getting the right advice.
According to the Deloitte Luxembourg and ArtTactic Art & Finance Report 2017, 86 percent of art purchases were motivated by collecting with an investment view—a 26 percent rise since 2012.
The art market has come a long way over the last couple of decades. The globalization of art is seeing trades around the world made with greater ease and due diligence than ever before. Smartphones and connectivity, along with the rise of art fairs, have helped sales more than quadruple during this time.
The international art scene is becoming a place without boundaries and this presents the Philippines—traditionally disadvantaged by geographic proximity to the big players in the US and UK, and perhaps China—with huge opportunities.
According to art market research firm, Artprice, the Philippines achieved the 20th highest art auction sales in the world in 2017, and, Southeast Asia, as a region, is gaining significance in the global art market. Art auction totals in the Philippines have seen a steady upward trend with an impressive 90 percent increase in the last three years.
Auction totals are the only publicly accessible figures, and, while they act as a good barometer of the market, they only represent a portion of total sales. The secondary (auction) market for art is much smaller than our international counterparts—most sales of Philippine art happen through galleries, dealers, online, and via art fairs.
Art market success in investment terms is correlated with the basic economic principle of supply and demand. Quality and strategic control of an artist’s output to market, are key factors relating to long-term growth in pricing. In order to create their profile and underpin “value,” artists need strong management and marketing, coupled with consistency in pricing.
The role of a gallery or dealer is multifaceted and goes far beyond just putting on exhibitions, opening bottles of wine, and selling artists’ works. Gallerists like Vita Sarenas of Finale Art File, for example, are responsible for seeking and supporting new talent. They help to facilitate their artists’ production of great works and introduce artists to their collector and curator base. The gallery essentially becomes the public advocate for the artist’s vision to a broader audience—allowing the artist to continue with the task of making great art.
Simply put, the upward trajectory of an artist’s career is often directly related to the expertise and commitment of the gallery or dealer representing them. Exceptional gallerists like Sarenas, who has been in business since 1983, are the market makers. Astute investors and collectors watch and are influenced by her—which artists she backs, and whom she promotes. Many collectors will actively seek her out to maximize their potential for profit or to build a highly regarded collection.
Good galleries like Sarenas’ Finale Art File act as a gatekeeper for quality. As a collector or investor, one should have confidence in the gallery that is selling you the work. Reputation and trust are at the core. Finale regularly sells out shows, places artists’ works into public collections, exhibits at high profile art fairs, contributes to public lectures and publications, and is talked about and written about in the public arena.
Sarenas continues to strengthen Finale’s reputation and trust by recently partnering with watch specialist, Paolo Martel, and art collector, Jayson Ong. Together, they launched Finale Auctions, a premier auction house, which is well positioned to guide collectors and investors in the acquisition process and help build portfolios of important art, watches, and jewelry.
The bottom line: Art provides the world with a sensory experience like no other. To own a piece of this world is a dream, to view it a privilege, and to earn a rate of return on it, a bonus. Finale Auctions combines all three.
Finale’s auctions will be held on Oct. 13 and 14, 2018 at Warehouse 17, La Fuerza Compound, 2241 Chino Roces Avenue, Makati. E-mail info@finaleauctions.com; call 8132310; or visit facebook.com/FinaleAuctions.
eric.jurado@gmail.com“‹