Young Pros' Brush With Art & Investment

Alex Mathew (name changed), managing director with a foreign investment bank, is a new entrant to the world of art collection. He had his first brush with art during his visits to galleries abroad. Soon, he started taking a fancy to art. And much to his surprise, he found that there were several promising artists whose works were available at a reasonable price.Mathew is part of a motley crowd of young professionals in their mid-thirties who have developed a liking for paintings. For some of them, it is a hobby, while for others, it is an investment which they think would appreciate with time.
"Many younger Indians have started collecting art as a result of their exposure to galleries and museums on their trips abroad. Also, rising income levels in India and with the HNI population doubling, people have more wealth to spend on art these days," Says Neha Kirpal, director of India Art Summit. However, it is not just companies and the well-heeled who are chasing these artwork, even students are drawn to them. "It is interesting to see college students pool in their pocket money to buy a piece of art worth Rs 20,000," says Kirpal.
India Art Summit is a two-year old organisation that holds trade fairs where desi and foreign galleries participate. Kirpal says that the Indian art market is growing at a rapid pace. This was seen in the Summit’s trade fair held in August last year where 54 galleries participated and generated sales worth Rs 26 crore. According to Kirpal, 40% of the consumers at the fair were first-time buyers. Globally, sales through art fairs have been between 20% and 30%, whereas in India it has been growing at 50% on an annual basis. The summit will host its next fair in January 2011 where 85 galleries are slated to take part. There will be 34 foreign participants — up two-fold from 17 in 2009. This throws light on the fact that like FMCG, auto and luxury goods sectors, international players are looking to cash in on the Indian boom as the western markets for art have reached saturation.
While prices of works by well-known artists have skyrocketed, it’s the upcoming artists who are attracting both the seasoned and the new collectors. "It is definitely a trend. More and more people are buying art, especially there is a good demand for younger generation of artists," says Bose Krishnamachari, artist and curator. "It is also a question of demand and supply as the availability of work is an important factor in determining the price. For example, the works of Tyeb Mehta and Manjit Bawa are in great demand because very little of their work is available." However, don’t draw conclusions on your own about the supply of an artist’s work. We all know that M F Hussain courts controversy the same way he finishes his paintings. But surprisingly, his works are not that easily available. "We were looking for some Hussain works, but we found that they are not easily available," says Krishnamachari.
Art has also emerged as an asset class most moneyed people would love to have in their investment portfolio. Blame it on Bollywood’s depiction of aristocrats. These days, the décor of a big shot’s home is incomplete without a painting on the living room wall or the hallway. Most of these people have started buying art because many wealth managers ask them to diversify their investment into it. "Yes, we tell these people to look at some art because it can be a great at times,’’ says the head of wealth management at a foreign bank. "These are super-rich people, who have diversified their portfolio into everything possible like equity, gold, mutual funds... We normally ask them to limit their art investment to 10-15% of their portfolio,’’ says Suresh Sadagopan, chief financial planner, Ladder 7 Financial Advisors. However, he tells his clients to tread very carefully. "People tend to go overboard when they start investing in something new. We ask them to do a due diligence before buying art because we don’t have any expertise in it."
Many investment experts concede that this lack of expertise is the main obstacle when it comes to investing in art.
"It is not very easy for someone to invest in art because it would involve some knowledge about the world of paintings. Most people are not comfortable buying expensive works merely on recommendations from a so-called expert,’’ says the foreign banker. Amar Pandit, a certified financial planner (CFP) with My Financial Advisor, says a lot of his clients invest in art but they buy them directly from auction houses and galleries. "A lot of times, it is not really an investment but its something that they like and enjoy," he adds.
Bose Krishnamachari says the first stop for a serious collector should be an art gallery. He also says collectors should keep a few things in mind while looking to buy art. "Obviously, the work has to be good," he says. Another important factor is to find out where the artist comes from and the history of the work. It is also important to find out how many museum shows the artist had.