Bull Market in Art Spurs Hunt for Big Returns, Records

November 15, 2013 Leave a comment

Bull Market in Art Spurs Hunt for Big Returns, Records

When an egg-shaped, punctured canvas fetched $20.9 million on Tuesday at Christie’s, it set a record for Lucio Fontana and demonstrated the allure of selling art in a bull market. “Concetto Spaziale, La Fine di Dio” had changed hands for $1.3 million a decade earlier at Sotheby’s (BID) in London. That’s a 32 percent annualized return, better than all but 13 companies in the Standard & Poor’s 500 Index over the same period.Call it art appreciation. The perception of investment value helped New York auction houses sell more than $1.9 billion in two weeks of semi-annual Impressionist, modern, postwar and contemporary art sales.

“Art seems to be a place where many ultra-high-net-worth individuals feel increasingly comfortable parking large amounts of money,” said Todd Levin, director of Levin Art Group, who advises collectors. “Money is cheap for them to borrow and they are looking for the strongest returns they can get.”

Above all was the Francis Bacon triptych “Three Studies of Lucian Freud,” which sold for $142.4 million at Christie’s, setting a record for an artwork at auction.

Six Hopefuls

At least six hopefuls chased after the work. At about $120 million, three bidders remained, including two Asian collectors.

“To have that number bidding at those levels is more of a commentary about our society than anything else,” said Jeff Rabin, a former Christie’s executive who provides art-investment advice at Artvest. “The world is very different than it was 10 years ago.”

The winner of the Bacon was Acquavella Galleries Inc., whose billionaire clients include casino magnate Stephen Wynn and hedge-fund manager Steven A. Cohen.

Andy Warhol’s “Silver Car Crash (Double Disaster)” fetched $105.4 million at Sotheby’s, setting an auction record for the Pop Art icon. At least 18 pieces exceeded $20 million this week.

Week’s Returns

Looking just at this week’s two evening sales, there were 27 works that previously appeared at auction, according to Michael Moses, co-founder of Beautiful Asset Advisors, which tracks financial returns on fine art globally.

Christie’s 17 pieces achieved an average annualized return of 14.4 percent. Sotheby’s 10 pieces achieved a 14 percent rate of return.

The best return belonged to Christopher Wool’s “One Year No Halloween.” The 2004 abstract painting fetched $602,500 in 2010 at Phillips and $2.1 million at Sotheby’s on Nov. 13 — an annualized return of 51 percent, Moses said.

Price guarantees were abundant, financed by undisclosed third parties and the auctioneers themselves. These encourage sellers to consign by promising them a minimum price.

Sotheby’s guarantees for this season more than doubled. As of Nov. 7, the auction house had outstanding guarantees totaling $206.4 million, of which $54 million was from third parties, according to a filing this week with the U.S. Securities and Exchange Commission. As of May 3, guarantees totaled $95.4 million, according to a filing.

Muse highlights include Greg Evans and Craig Seligman on movies, Jeremy Gerard on theater.

To contact the reporters on this story: Katya Kazakina in New York at kkazakina@bloomberg.net; Philip Boroff in New York at pboroff@bloomberg.net

Filed under Macro Trends

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