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Interest in quality works revives as art market stages a smart recovery
Increased instability and constants bouts of volatility in the global financial markets are prompting many alert investors not only in India but internationally to consider alternative modes of investment. No surprise, immense potential of art as a bankable long term asset has drawn them closer to it, especially against the backdrop of weakening stocks and commodity prices. Expectedly, art investment is back in vogue. The past one year or so has witnessed a marked recovery; most top artists now quoting at the pre-crisis levels. Interest in quality works has revived with a growing number of collectors keen to enter the market. This changed sentiment reflects in the strong sales of modern art now gradually returning to levels witnessed before the financial crisis. No surprise, Christie’s put up a great show in 2010, with sales totaling $5 bn. Sotheby’s results too have been impressive. The auction house’s profits pegged at $161m on revenues of $731m and total sales of $4.8bn in 2010, an 88 per cent increase over 2009.

According to gallery owners at ARCO, Europe's major contemporary art fair in Madrid, many collectors are being more selective this time and it’s mostly the very wealthy who have returned to the market as growth in the US and other major western economies slowly picks up. They are looking to snap up quality works prices of which have fallen in recent years mostly as an investment. So, what is the trigger for the buying spree? As the latest Cap Gemini & Merrill Lynch World Wealth Report reveals, uncertain financial markets are driving many high-net-worth (HNI) individuals to become ‘investor-collectors’. Their thought process goes beyond the actual simple investment calculations; it's about cultivating and sharing and learning more about a passion.

The report points out that HNIs are returning to passion investments, approaching them as ‘investor-collectors’ especially with financial markets still in flux. They are seeking to collect things perceived to carry tangible long-term value. Art and other collectibles like coins, antiques or wines are attracting these ‘investor-collectors’ the most. Indian HNIs mostly restrict their passion investments to tangible asset classes as they are wary of sophisticated financial instruments and are more conservative in their investment strategies, it states. Art 'remains a popular investment option for wealthy in the UK during tough economic times marked by a period of low interest rates and economic worries, a recent BBC News study mentions, quoting from the Royal Institution of Chartered Surveyors (Rics) survey.

Rics spokesman Chris Ewbank explains: "The art and antiques market remains a strong performer for buyers looking to invest in more tangible assets to guard against the uncertain economic picture." The trend of investing in ‘emotional assets’ is getting stronger with investors, having suffered from the global crisis, returning to objects ‘closer to their hearts’, which also provide some protection, liquidity and a decent ROI. As investment advisors explain, when you talk to people about a thing they understand, they love and also relate to, you are infusing positive emotions into investing. Explaining the development, The Forbes news story (The Passion Portfolio: Investments of Love) elaborates: “With a turbulent market and a whole new generation of investors who equally value the ‘experience economy’, passion investing is experiencing a strategic resurgence. Whether it's 16th-century art, precious gems or Swiss watches, they are now adding collectible assets to the portfolios not only as a means of diversification, but also as a way of holding the things that they love the most.”

The report quotes Bernard Duffy of the London based Emotional Assets Fund as saying: "A clear convergence is happening between the realms of collecting and investing." Underling the strength of art market in this context, Philip Hoffman, the London based Fine Art Fund Group CEO, mentions, "It’s not highly speculative or trendy if you understand what you’re doing. Over a 10-year period, if you’re buying the best, it is possible to double, triple, or even quadruple your investment." The trend now transcends geographic boundaries, with markets like the Middle East also showing more interest. "In countries like India and China, investors have historically had a higher predilection to hold tangible assets like gold, gems, jewelry and art - both as hedges against inflation and investments," explains New York based art advisory firm Artvest’s cofounder Michael Plummer.

No surprise, wealth managers in India are incorporating art into the HNIs investor’s overall asset allocation decision. There is a perceptible change in the investors’ behavior and mindset. Pankaj Narain, director, head private clients (banking & investments), Deutsche Bank (India) concurs with the fact that HNIs have indeed began spreading their investments to diverse asset classes. Rashid Rana, Jayashree Chakravarthy, Paresh Maity, Arpana Caur, Jayashree Burman and Jagannath Panda are some of the noteworthy names currently dominating the Indian art scene whom you may track. It is advisable to have a portfolio with both modern and contemporary works as each constituent has a marked potential. You may invest part of your folio in the young and upcoming contemporaries like Prajjwal Choudhury, Rahul Arya, Inder Vir, Anu Agarwal, Nikhileswar Baruah, Amarnath Sharma, Heeral Trivedi, Rahul Chowdhury, Jignasa Doshi, Hindol Brahmabhatt, Jagannath Mohapatra, George Martin, Nitish Bhattacharjee, Prasanta Sahu, Jagdish Chander, and Meetali Singh.

Genuine art lovers and investors can make good returns if their choice of works in terms of works and price point is precise. The process of buying art is more about forming a close personal connection with the piece you wish to acquire. If you’ve missed the opportunity, you may still go bargain-hunting, as there’s still enough scope for snapping quality art. Now is the time to pursue your passion and hold it for some time to come…