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Saturday, 10 September 2011


I was invited sometime in May (if I'm not mistaken) by the Henry Butcher Art Auctioneer people and the Petronas Gallery in Kuala Lumpur to be one of the panels for their joint public art program, called "Art: The New Asset Class in Malaysia". I was asked to speak about USM Fine Art Collection. During the program, I was more interested in the views given by two panels, which reflect two distinct attitudes or takes on art. The first is Phil Whitaker, Director of Sotheby's Institute of Art Singapore, and the second is Ambassador Dato' N. Parameswaran, CEO of Iskandar Investment Singapore. Phil epitomizes the business face of art, while Dato' Param emits the idiosyncratic, human dan personal face to it. It was a wonderful learning trip and lesson for me.

The following is a review of the program taken from the Henry Butcher Auctioneer's website.

Public Art Programme 2011

ART: The New Asset Class in Malaysia

Henry Butcher Art Auctioneers in its efforts to promote the art industry besjdes establishing auctions to provide a transparent platform and an avenue for collectors, galleries and others in the art world to buy and sell their works, is also collaborating with Petronas Art Gallery in organizing open forums to rouse interest among the general public. The second of its series examined the topic 'Art: The New Asset Class in Malaysia', brought together authorities on the subject, namely, Ambassador Dato' N. Parameswaran, CEO of Iskandar Investment, Singapore, Phil Whitaker, Director of Sotheby's Institute of Art, Singapore, Professor Hasnul Jamal Saidon, Director of Museum & Gallery Tuanki Fauziah, USM, Richard Koh, Founder of Richard Koh Fine Art and guest moderator, Suryani Senja Alias, Founder & Managing Director of Cult.

Art is observed as the expression of imagination and creative skill which is usually translated into a visual form such as paintings and sculptures, among others. It is appreciated for its beauty and power in revoking emotions as it often relies on symbolic significance but what about its monetary value? The following articles is an abstract of the various views and exchanges made during the forum from not only the art experts but also members of the public.

Director of Sotheby's Institute of Art, Phil Whitaker, tackled this absorbing topic of discussion by presenting a graph chart on the risk and return of art investment by using data collected from January 1976 to December 2004. The chart showed that art investment was divided into three categories - US art, UK art and general art. The chart indicated that US art had the greatest return and greater variability compared to the other groups with a little over 8% on the average annual return and 14% average annual return standard deviation. Whereas, UK art had about 5% average annual return and an even lesser reliability than US art as its average annual retuen standard deviation was 9%. The average annual return for general art was 7% and showed 13% average annual return standard deviation.

These statistic can be justified by taking into consideration that art has low liquidity. Some may even go so far as to say that art is illiquid, opaque and unregulated. Phil Whitaker cited Picasso's Nude, Green Leaves and Bust as an example. The 1932 work of art is a depiction of the painter's mistress and often-time subject which fetched a record-breaking price of $106.5 million in 2010. The concern when it comes to liquidity of art as an asset class us that if and when the current owner of the painting wishes to sell it, there would be the arduous task of looking for a buyer willing to top the price that it was bought for inclusive of the administrative, insurance, storage as well as conservation cost during the time which the artwork was in the care of the owner.

When looking to invest in art, one must be aware of its low transparency in the market. Price assessment is a thorny issue as there is a high asymmetric relationship with the information given out in auctions. Potential buyers are strongly urged to do their due diligence and research the works of artists - be it their educational background, their promotional representatives, as well as the lication of works displayed, and most importantly, the quality of the artwork. Richard Koh, the founder of Richard Koh Fine Art shared his personal experiences concerning artworks which were showcased excessively and how the value of these works are deemed as less valuable due to the mere fact that the artist's work is heralded as common and not exclusive. This form of promotion greatly affects the artist's career.

More often that not, the decision to purchase an artwork lies deeply rooted in its appeal to the beholder but in the case of art investment, beauty alone may not be enough. One moust seek art pieces which have strong symbolic significance - even better still, cultural icons as they capture our invaluable heritage and culture and are able to withstand the test of time. Art buyers were strongly advised not to purchase fashionable or trendy works of art which lose their appeal very rapidly. Richard Koh and Phil Whitaker shared the same opinion pertaining to this matter; quoting that 30-40% of artists featured in art auction houses significantly lose their popularity within the time frame of 5 years.

Another reason to purchase good quality artwork is that it holds high residual value. Professor Hasnul Jamal Saidon, Director for Museum and Gallery Tunku Fauziah (MGTF), University Sains Malaysia (USM) revealed that the University's art gallery acquired art on a selective basis. MGTF's collection is a specialized one which gravites towards periodic representation of modern Malaysian art rather than representaion of selected major artists. This approach led MGTF's art collection to be recognized internationally by scholars and researchers as one of the most valuable and momentous collections of modern Malaysian art in the region as it signifies the socio-cultural uniqueness of Malaysia then and now. This purchasing behaviour has resulted in an exponential growth in the market value of the artworks in MGTF's collection. With art investment in mind, the foresight of the Museum can be seen as an inspiration to keen art investors in order for them to garner a profitable purchase.

In summary, art is not deemed as as popular form of short-term investment as it does not repeatedly generate a steady income flow, especially when the buyer has not invested in works which appreciate in value. The task of determining the price appreciation of an artwork is a challenge in itself as its valuation defies financial logic. While some work of art appreciate considerably over a short course of time, it is oftentimes difficult to uphold a positive rate of return in the long run. Yet those who have achieved profit by investing in art constantly stress on the importance of investing in high-quality art. Dato' N. Parameswaran, who owns a remarkable collection of over 3,000 artworks, is one of them. Studies prove that return in art investment definitely surpassed fixed incomes, though it falls short of performance when weighted against equities. For that reason, it is safe to say that investing in art is a viable option depending on the quality of the work purchased.

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