Paintings, sculptures and other creative expressions have gained recognition as a unique and potentially lucrative addition to investment portfolios
by SHAUQI WAHAB
INVESTMENTS are traditionally associated with stocks, bonds, real estate and commodities that offer a range of options, each with its own risk and return profile.
However, in recent years, there has been a growing interest in Malaysia with art as an alternative mode of investment.
Paintings, sculptures and other creative expressions have gained recognition as a unique and potentially lucrative addition to investment portfolios.
The Malaysian Reserve (TMR) explores how art serves as an alternative mode of investment and its correlation with traditional investments, as well as how art can diversify an investment portfolio, offering both financial and aesthetic benefits.
Art Vs Traditional Investments
Art is intriguing to investors because it serves as a tangible asset that can be appreciated over time, similar to real estate.
The value of a well-chosen piece of art can increase significantly, making it a viable option for those seeking capital appreciation.
The scarcity and uniqueness of artworks can drive their prices upward, especially for renowned artists or historically significant pieces.
Wei-Ling Gallery owner Lim Wei Ling has eight years’ experience as a stockbroker and sees the correlation between art and traditional investments.
At the start of her journey, the local art market was in its infancy, a small market with a handful of serious collectors.
Having no proper structure and art ecosystem, artists back then would try their best to sell their work to collectors, who generally had the upper hand in the transaction.
Over time, artists became more established, there was more traction and a better understanding of their works and they became more sought-after.
This in turn has allowed for the price of their works to appreciate and gain fair values.
At this point, artists are in more control of the transaction as they determine the price of their artworks.
Lim said in terms of value, the average price of an art piece at that time was very different compared to the present due to the growth in the number of collectors, a general upsurge in interest in art collecting, as well as art’s ability to appreciate over time.
“In 2002, almost everything was below RM10,000 for prolific artists. Fast forward to today, we are looking at young artists who are selling their works for that price, and mid-career and senior artists are now transacting at anything from RM100,000 to RM1 million,” she told TMR.
Lim said collectors who started earlier on have seen their collections rise significantly in value. This happens in tandem with the particular artist’s popularity and development in the world of art.
“Collectors who acquired particular mid-career and senior artists’ artworks 20 years ago, have seen their prices appreciate 10 or 20 times,” she added.
This form of investment is becoming more common as the demand increases with the rise of new collectors.
Wei-Ling Gallery has been around since 2002 and has worked to develop the careers of many leading local artists both within Malaysia and in the international arena.
One of the best parts about art as an investment is its non-correlation with economic indicators where its market can be less influenced by macroeconomic factors, such as inflation rates, interest rates or GDP growth, compared to traditional investments.
Intrinsic Value
Henry Butcher Art Auctioneers director Sim Polenn said the auction process is an open, transparent market.
“The prices will be determined by the market. No one can control the market,” he told TMR.
Lim also believed that unlike stocks, which derive their value from the performance of the underlying company, art has intrinsic value.
She said the quality, historical significance and artistic merit of a piece contribute to its value.
“A good, relevant and strong investable artist is one whose work will withstand the test of time,” she added.
To cultivate the intrinsic value of an artwork, Lim said the message that the artists are trying to convey must be relevant to the times through which they live.
She highlighted the works of artist Choy Chun Wei, who, in 2006, created a set of collage works that were inspired by the introduction of Google Maps, where people were for the first time able to see satellite images of earth and cities.
“He went to the streets and collected items discarded by people as they went about their daily lives like ticket stubs, cigarette butts, and so on,” she said, noting that urbanites are voracious in their consumption, throwing away anything that was no longer of use.
“This is reflective of the state and behaviour of our society, and this is how the artist encapsulated his observations of the world in his art,” Lim added.
She also said artworks should evolve and change with time, which makes art investments less susceptible to market sentiment and are often considered evergreen.
Another connection between art and traditional investment is the diversification potential in the art industry. Diversification is a fundamental principle of investment strategy.
The diversification benefit of art investment lies in its movement which is not in sync with traditional financial markets, which means that when stock or bond markets are underperforming, art investments might continue to thrive.
Meanwhile, Polenn said one of the key factors that make art attractive for investment is the artist’s portfolio.
However, Haekal Amron, the son of prominent Malaysian artist Amron Omar, thought that not many people are familiar with the right way of investing in art.
“It is a strange new world for them but they are too afraid to join the community and ask for directions,” he said.
On how values go up at an auction, Haekal said it all has to do with the reputation that the artist has gained over his tenure as an artist, where a good portfolio would result in a bidding war.
Like Lim, Haekal said an artwork will increase in value over time, an example would be his father’s works.
“An artwork from the past 15 years has not depreciated in value. The value keeps increasing, including my father’s paintings,” he said.
Polenn recalled an art piece called “Buyong”, which set a new record price of RM280,000 at his auction house.
“The previous owner bought it from the Henry Butcher Art Auction 10 years ago at RM60,000,” he said.
Finding the Right Artist
Advising aspiring art investors, Lim said one must identify a serious artist who possesses perseverance, integrity and discipline, and is unwavering and committed to what he or she wants to say.
“The artist must be authentic and unafraid to take risks and evolve,” she said.
She added that the best practice for newcomers is each time they enter an art gallery, ask questions about the artist.
“The first question to ask is the artist’s portfolio. You want to understand where the artist studied and graduated, and how many exhibitions the artist has had,” she said.
Lim also discusses art investment in her Wei-Ling Gallery podcast which is available on Spotify.
While art investment offers financial rewards, artists want investors to also appreciate artwork for their cultural values, the growth and the evolution of the artists, and also to understand the message that they wish to convey.
- This article first appeared in The Malaysian Reserve weekly print edition