Is art a good investment? Here’s some expert advice

Anita Heriot, president of The Fine Art Group, joins BNN Bloomberg to discuss the pitfalls of art investment and share how to make the most out of an art invers

Just recently, about 27 paintings from Hudson’s Bay’s collection were sold for nearly $5 million at an auction.

Around the same time, a portrait of Elisabeth Lederer by Austrian painter Gustav Klimt sold for nearly $330 million at the Sotheby auction in New York. The same auction sold an 18 karat gold toilet for nearly $17 million.

Who is buying this art?

“Someone very, very wealthy,” Anita Heriot, president of the Fine Art Group, told BNN Bloomberg.

Part of Heriot’s job is advising clients on how to invest in art. She says it can be great for diversifying anyone’s portfolio if done correctly.

“You can park your money there. It can sit there. It doesn’t fluctuate the way we see stocks fluctuate,” said Heriot.

She says clients should not exceed more than four per cent of their overall portfolio in art.

“If someone’s spending over $200 million in an artwork, note that that means their true wealth is tremendously higher,” said Heriot.

Clients should also think about a return on investment by referencing the nine categories of analysis art experts use to determine value which look at style, context and psychological impact.

Heriot said just like blue chip stocks, blue chip art is known for being reputable and stable. Paintings of Monet, Picasso or Basquiat fill that bill because the artists were catalysts of change.

Acquiring those pieces is a solid investment, she said.

“Will it grow exponentially? No, but it will hold its value,” said Heriot warning that even those artists can have some “bad” paintings to invest in.

She also warns about investing in contemporary artists, which has been an increasing trend in the last decade with large galleries betting on living artists.

“They’re risky acquisitions,” said Heriot.

“What we see is a lot of flipping of these artworks. They spike high, they go low, and a few of them hold their value over time,” said Heriot, calling those investments penny stocks.

She warns that it is important to remove emotion when bidding.

“You can have passion, but you really do need to have a non-emotional, unemotional side to that process, and that’s why it’s important to work with someone who knows what they’re doing,” said Heriot.

Art sales can be unpredictable. She points to the early 2000s when the stock market crashed and art acquisition jumped up drastically with buyers from Asia, Latin America and the Middle East.

“What we’ve seen over the last 20 years is a real entrance in the marketplace of ultra, ultra high net worth clients that are really interested in acquiring these works for a variety of different reasons— everything from showing kind of nonverbal ways of communicating power," said Heriot."

“You walk into a house and you see a Klimt, you’re gonna go, ‘there’s something important going on.’”