Art collecting vs. art investing

The perils of being a dilettante and why the right advice matters in the opaque art world

16 Jun 2018

In early May, David Rockefeller's three-day estate sale brought in $833 million for charity, setting an auction record for a private collection. Rockefeller—the world's oldest billionaire—passed away last year, at the age of 101, leaving behind a legacy as a banker, philanthropist and heir to one of America's legendary fortunes.

As part of Rockefeller's very detailed estate plan, Christie's auctioned off more than 1,500 items from the estate of Peggy and David Rockefeller, including Impressionist and American paintings, Napoleon's dinner service, Buddhist deities, African figurines, Japanese porcelain and Persian rugs, among other objects, with paintings from Picasso, Matisse, Monet, Manet, Van Gogh and beyond.

In this next installment of video interviews, the topic of art investing versus art collecting is the focus of a conversation with John Mathews, Group Managing Director and Head of Private Wealth Management (PWM) and Ultra High Net Worth (UHNW) for Wealth Management USA, and Doug Woodham, managing director of Art Fiduciary Advisors and former President of Christie's Americas.

Art dilettante vs. art connoisseur

Woodham warns that the art market can be "a dark and opaque place" for investors—so proceed with caution, particularly if you start spending meaningful sums of money relative to your wealth. That being said, collectors who become especially passionate and knowledgeable about a particular artist or field of work will stand a much better chance of succeeding as investors in art.

"If you're a dilettante in the art market, oh my gosh," Woodham says. "If you're a connoisseur or you go deep or you really approach it with a seriousness that Warren Buffet would do if he were an art collector, which he's not, then you've got a much better chance of having success.”

Works by historically important artists such as Matisse and Monet tend to be a reasonable store of value over time, which is why serious collectors tend to prefer buying masterworks, Woodham says.

"The only qualifier," he adds, "is even if you buy a master work, you've got to plan on holding it for a long period of time. … If you try and flip a masterpiece too soon, it's dangerous. So you have to think about this as a long-term buy, a long-term hold as opposed to a flippable asset."

Still, for many collectors, passion is more important than potential profit, Mathews notes, recalling recent conversations he had with clients and collectors at Art Basel Miami Beach.

"When we had this discussion about liquidity, which is really important, … their comment to me was, 'I, kind of, like having something on my wall that I don't see a price every single day on it like I see in the stock market.' So it goes both ways, too."

Have you thought about how best to protect and unlock the value of your collection? Together we can find an answer. Connect with your UBS Financial Advisor or find one.

Disclosures

Doug Woodham is not a UBS employee. He is part of the UBS Professional Network, which provides Financial Advisors and/or their clients with access to a network of select third-party consultants in various fields related to families. He is a former President of Christie's.

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