Emerging-market billionaires, driven by vanity, easy money from the world’s central banks, and a quest for safe investments, are taking the contemporary art market to new heights.
Art collectors made news for a second straight night on Wednesday, as Sotheby’s held the biggest auction in its history, led by the record-setting US$105 million paid for Andy Warhol’s Silver Car Crash (Double Disaster).
The previous day, hedge fund managers, oil princes and oligarchs were bidding by telephone at Christie’s when the auction house sold Francis Bacon’s Three Studies of Lucian Freud for a record US$142.4 million, in what was seen as a test of the global art market’s health.
It passed. Among the reasons, art consultants and hedge fund managers say, is the rise of a class of super-wealthy collectors, many of them from Asia, the Middle East and Russia — zones bolstered by years of booming commodities prices.
“While we are seeing big numbers for many lots, there is only a small number of buyers and it is not dominated by American financiers,” said Abigail Asher, a partner at art consultants Guggenheim, Asher, Associates Inc.
Sotheby’s and Christie’s buzzed with energy, art industry insiders said, as people realized just how willing bidders were to pay staggering sums for the artworks on auction.
“People are clearly not done emptying their pockets,” said Elizabeth Jacoby, who runs BSJ Fine Art with her mother, Beverly.
Jeffrey Gundlach, chief executive officer and chief investment officer at investment management firm DoubleLine and an avid art collector, said he has never seen a market like this one.
He said the high-end art market is being driven by “a tiny fraction of the population in certain emerging economies,” where people “don’t trust their currency and don’t trust the stability” of their economies.
“There is so much new wealth being created right now, and it will only take a handful of new billionaires minted in China, for example, to significantly impact this market,” said one hedge fund manager who follows the art business closely, but who asked not to be identified.
Emerging-market billionaires will have to fight old world wealth. Super-wealthy art buyers in the West may have some of the same economic fears, amid uncertainty over when and how quickly central banks will unwind years of easy money policies imposed after the 2008 global financial crisis.
While low inflation reigns in Europe and the US alongside lackluster economic growth, many economists and others fear that years of “quantitative easing” by the US Federal Reserve, in which the Fed has bought bonds to help stimulate the economy, will eventually trigger rapid price rises. And if not, the end of that easy money could trigger losses in conventional stock and bond markets.
The prices for paintings held steady during the so-called Great Recession, as demand from collectors kept coming from many corners of the world.
“Thanks to quantitative easing, there is a lot of liquidity floating around, and we are seeing a trend where investors are moving out of some asset classes like bonds and into commercial real estate and art,” said Charles Gradante, managing principal at financial advisory firm Hennessee Group, which invests with hedge funds.
Still, the demand for contemporary art as a safe haven investment has raised eyebrows among those who view its value as unproven when compared with the classics.
“Today’s contemporary art market is broader than it used to be, and the pool of would-be acquirers is certainly bigger and richer than ever before. But the values? We say they have never been more precarious,” Jim Grant said in his Grant’s Interest Rate Observer newsletter in September.
In another record-breaking auction starring the super-rich, the “Pink Star,” a flawless pink diamond the size of a plum, sold for 76.3 million Swiss francs (US$83.02 million) in Geneva on Wednesday, a high for a gemstone at auction, Sotheby’s said.
For the world’s wealthiest, art is one of the more elegant in a small pool of safe haven investment options: It is tangible, transportable, and resistant to inflation and conventional market turmoil.
“There is a group of super-rich. They buy super yachts, super private planes... The prices of artwork reflects this. The difference in real estate and art is they are seen as an alternative asset ... whereas the others are toys,” said a private art dealer who attended Tuesday’s auction, but who did not want to be named.
Gradante said the appeal of art may even be taking some of the froth out of the market for the iconic safe haven, gold, “which has long been an inflation hedge, but can’t be enjoyed by owners the way a painting can be.”
Hedge fund managers have long had a love affair with the art world, in part, because it is fun to show off.
John Paulson’s office is decorated with works by Alexander Calder, Julian Robertson owns some Picassos, and Steven Cohen displays a Jeff Koons Balloon Dog sculpture at his home in Connecticut.
Some investors who like art are going a step further — buying auction houses.
Billionaire hedge fund manager Daniel Loeb’s Third Point LLC and Mick McGuire’s Marcato Capital Management have acquired stakes in Sotheby’s and have been pushing the centuries-old auction house — Sotheby’s, now based in New York, traces its roots to 18th-century London — to improve its balance sheet and operations by adapting to art buyers’ changing tastes and becoming more active in private sales.
Since these investors began pressuring for change in June, Sotheby’s stock price has climbed roughly 20 percent. Loeb was at Christie’s on Tuesday, but his representative did not say whether he was buying or selling.
Gogoro Inc (睿能創意) yesterday launched its first electric bicycle, the Gogoro Eeyo 1, in Taiwan, after unveiling the bike in New York in late May and in France on Tuesday. The company said it would also introduce the series in other European countries such as Germany and the Netherlands. The “Eeyo project” is the fourth of Gogoro’s eight projects that concentrate on smart transportation, which includes Gogoro’s electric scooter, battery swap system and electric scooter sharing service, company founder and chief executive officer Horace Luke (陸學森) told a media briefing in Taipei. “There are various types of city commuters. We will not
EXPERIMENTAL DRUG: While news about a COVID-19 vaccine is more eye-catching, developing a treatment would be more viable, the Senhwa boss said Senhwa Biosciences Inc (生華科) aims to raise NT$1.5 billion (US$50.57 million) by issuing 15 million new common shares in the third quarter of this year to fund the research of new drugs, including the experimental drug Silmitasertib for the treatment of COVID-19, the company said on Monday. That would be the firm’s largest fundraising effort after it raised more than NT$1.4 billion from an initial public offering on the Taipei Exchange (TPEX) in April 2017, chief financial officer Sarah Chang (張小萍) told the Taipei Times by telephone. The price of the new shares would depend on the firm’s average share price
NOT A PANACEA: Offering 5G services would not solve the problem of declining telecom incomes, chairman Sheih Chi-mau said, expecting a flat 5G telecom revenue Chunghwa Telecom Co (中華電信) yesterday became the nation’s first telecom to debut its 5G services, offering tiered tariffs that include a threshold of NT$599 and flat rates, as it aims to switch half of its subscribers to the 5G network within three years. Subscribers would have unlimited data transmission for monthly fees starting at NT$1,399 — the same flat rate as when the company launched its 4G service in 2014 — and they can subscribe to the highest-rate plan for NT$2,699 per month for faster data transmission speeds and larger bandwidth, the company said. Data transmission speeds would be within the range
ROW: A probe would determine if the rights of shareholders who were not allowed to vote yesterday had been violated, while the stock exchange also wants answers The election of board directors yesterday at Tatung Co (大同) sparked controversy after the company blocked some institutional and individual shareholders from participating in the general shareholders’ meeting, prompting the Financial Supervisory Commission (FSC) to announce that the vote would be investigated. Lin Kuo Wen-yen (林郭文艷) was re-elected as chairwoman of the household-appliance maker’s nine-member board, but prior to the vote she announced that several shareholders would not have voting rights. They were being denied a vote because they had contravened the Business Mergers and Acquisitions Act (企業併購法), and the Act Governing Relations Between the People of the Taiwan Area and