Buying art as an investment

Two decades after his death, Andy Warhol, a larger-than-life artist known for hype and breaking boundaries, might even have been shocked by the recent $71.7 million sale of one of his paintings.

"Andy Warhol has been ranked as the top-selling modern artist in the world," said Tom Sokolowski, director of the Andy Warhol Museum in Pittsburgh. "He had been following Jackson Pollock and Pablo Picasso. But he's now commanding the highest prices on the market."

Warhol, who became an American legend represents the gold standard of today's high-priced art market, but when his works were initially bought, their prices were in the mere thousands.

Art as an investment can be very lucrative -- and extremely risky.

"I regard art as a hard asset versus an investment," said Sam Berkovitz, director of Concept Art Gallery in Pittsburgh.. "To me, an investment is a purely financial instrument. There have been very few very successful art investors.

"Art tastes are so cyclical. It's harder to pick the next hot artist than picking the next Microsoft. With Microsoft, you can buy and sell the stock any day, whereas the art market is not nearly as liquid."

With interest rates at their lowest in years and the stock market plagued by volatility, many people are seeking alternative ways to store their wealth, including investment grade art.

Art can be a worthwhile investment due to its ability to appreciate over time, even when other asset classes such as stocks and real estate are suffering.

The combined sales from the annual spring art auctions earlier in May at Sotheby's and Christie's in New York brought in $1.2 billion, easing concerns about the health of the high-end art market.

Laura Niemira, director of KN Gallery in Chicago's John Hancock Center, said the recent auctions at Christies and Sotheby's "were a big measure people in the art market use. It left dealers, collectors and gallerists with the feeling that the art market bubble did not burst."

William Gamble, a lawyer in East Providence, R.I., who specializes in alternative markets, believes that the sales were driven by European buyers attracted by the weak dollar. He said art investors are lucky if values keep up with inflation and that values are highly dependant on fashion.

"There's no guarantee if you buy art by any particular artist they'll be in fashion 20 years from now," said Gamble, author of "Freedom: America's Competitive Advantage in the Global Market."

He said currently two of the hottest contemporary artists are John Currin, best known for paintings with provocative sexual and social themes; and Peter Doig, a Scottish artist whose paintings are among Europe's most expensive.

Ben Crawford, chief marketing officer for MutualArt.com in New York, said what makes art investing interesting is the size of the potential return when a piece is sold, and being able to own something beautiful and thought-provoking that can enhance your everyday life.

"Stock certificates don't have that benefit," Crawford said. "People should buy art anyway, and it makes sense that they should buy investment-grade art if they are going to do it."

MutualArt.com helps consumers interested in investing in art get educated on artists and types of art. It has an archive of 150,000 articles about art and a database of artists.

"You could buy art by unknown artists, but from an investment point of view, it's a crapshoot," he said. "But if you buy from a recognized artist, the chance of getting your money back is much higher."

Sokolowski said Andy Warhol's art was a prime example of that.

"The higher price has less to do with his talent and more to do with the fact that Warhol works are immediately recognizable," he said, adding that by the end of his life, Warhol, who died in 1987, was charging $37,500 for portraits.

"Just like owning a Jaguar or Louis Vuitton luggage, when someone sees it, they know you have the money to afford it," Sokolowski said. "If an artist is less known, the audience who sees it doesn't know its worth and can't put a price tag on it."

For smaller investors who don't have millions to spare for artwork, Crawford said serious artwork can be acquired for as little as $1,500 with a good chance of appreciating over time.

Any local artist who is getting recognition beyond the town he or she lives in -- especially if that recognition is in New York, London or Los Angeles -- could be a good investment because that artist is probably on his or her way and because of the local connection, it might be easier for an investor to build a collection.

E-mail Tim Grant at tgrant(at)post-gazette.com. For more information visit scrippsnews.com