“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.