Art: Passion or investment?

Art: Passion or investment?

July 25, 2022

Hirschberg Harounian Art Advisory says “both”

I’m often asked by my clients about art. A passion where my fiscal knowledge runs a little ahead of my aesthetic appreciation. I spoke to Lexi Harounian and Julia Hirschberg, co-founders of
Hirschberg Harounian Art Advisory, about the art, science – and economics – of today’s art market. 

Lexi and Julia, as experienced advisors in the art world, what would you say to someone looking to start a collection? 

Lexi:  First we’d say congratulations! Collecting art is not only a fantastic investment opportunity, but it is also extremely fun. You’ll be part of a creative community and a lifelong conversation. 

It takes time, patience and education to build a thoughtful collection. Our goal at Hirschberg Harounian is to help be the intermediary which allows art to enrich people's lives. We map out specific goals and intentions for collecting at the onset.  These evolve but it enables each collection to begin with a defined mission -  whether you’re collecting for investment purposes or buying what resonates with you. The sweet spot is probably somewhere in the middle – collect for love, spend with prudence.

Rich:  Broadly though, art – measured by the Artprice100 Index - has outperformed the S&P over the last 25 years. 

Julia:  Yes. An estimated value of privately held art is about $2 trillion. But there are many careful considerations that go into making smart buying – and selling -  decisions. 

Lexi:  People often ask us, who will be the next big thing? Industry knowledge and relationships, research, experience, and being involved in the artistic community go a long way. There are different things to consider. Emerging artists making new work versus established artists on the secondary market have a different set of questions.

Medium, scale, quality, rarity, historical significance, authenticity, provenance, auction history, and condition all play a part, as do more nuanced criteria, such as the reputation of the seller, market trends, exhibitions, and even press coverage – what’s hype and what’s not.

As advisors, we help clients navigate the complexities of the art market and help them find works that fit their budgets and specifications. Medium, scale, quality, rarity, historical significance, authenticity, provenance, auction history, and condition all play a part. As do more nuanced criteria, such as the reputation of the seller, important private collections, market trends, exhibitions, and press coverage.

Rich:  I have to ask – NFTs. Have I missed the boat on bored apes

Lexi:  Actually digital art has actually been around since the 60s! The canon of art history has always been defined by rule breakers. NFTs are a relatively new development and have certainly  been making headlines – for better or worse. They might be here to stay, but some kinks need to be worked out. 

Maybe we’re witnessing the discovery of an exciting new medium. There doesn’t appear to be much overlap in the consumer-base of NFTs and the collectors of more traditional art forms. I think this will change though. 

Rich:  Is photography collectable? 

Julia:  Absolutely - and typically at a more attainable price point. A good photographer is one who masters and challenges the medium. Cindy Sherman, Wolfgang Tillmans, Man Ray, Ana Mendieta, Thomas Ruff, Diane Arbus, and Hiroshi Sugimoto and many others have shaped the history of art, not just photography. 

On a practical note, it's especially important to make sure the photographs are produced and framed well, part of a limited series and in good condition. Photography isn’t suitable for humid climates and direct sunlight. 

Rich:  Where would a beginner collector like me, well, begin? 

Lexi:  Working with a professional could be hugely beneficial because not only will they guide you through the sometimes intimidating industry and deal with all of the logistics of art collecting, but because it has become increasingly difficult to gain access to great emerging art without connections. 

Your taste will evolve, you may have regrets about things that you bought but mostly about things you didn't buy. The best advice we give - listen to your gut and be decisive. The best opportunities can move quickly. 

Rich:  And for those people more interested in investing in “blue chip” artists than buying for love, fractional art funds are interesting. They have the potential to add a layer of diversification to portfolios, but due diligence is needed.

Julia:  These funds have generally been successful and they are some of the more active buyers on the market right now. 

Rich:  What resources would you point me to? Whether for research or just for interest and education?

Lexi:  Start by visiting museums and galleries in your city – gallery openings can be especially fun and a great time to see art after-hours. SeeSaw is a great app to help track gallery exhibitions and openings in certain cities. Art fairs can help you learn what's on the market in a condensed space. This is also where you can pick up on recurring trends and to learn what you like and, sometimes more importantly, what you don't.

The UBS x Art Basel Art Market Report is something we make sure to read thoroughly each year. Some of our favorite publications and news platforms include: Artforum, Juxtapoz, Artnet News, ARTnews, The Art Newspaper. We listen to a few Podcasts: In Other Words, Dialogues (by David Zwirner), and The Art AngleOur Instagram page, @HirschbergHarounian, is also pretty educational and highlights our favorite artists and exhibitions in addition to art historical information. 

But you’re the money expert. What financial advice would you give art collectors? 

Rich:  As you said, treat the money side with prudence. First, make sure the piece or collection is recently valued and appropriately insured for that value. There might be pleasant surprises on that front but increased valuations come with a list of to-dos.

Second, but again as with any other asset, make sure that wills, trusts and estate plans are updated to reflect the value and discussed with loved ones in advance. 

Julia:  When buying art make sure to consider the full cost of ownership. Shipping, install costs, sales tax, framing etc. And when buying with a partner, make sure you have the selling terms and arrangements agreed upon beforehand. Art can become an investment with a lot of emotional attachment so be prepared.

Rich:  Any last thoughts? 

Lexi:  Look after your collection, make informed decisions, and trust your gut!