Enjoy investing in art and hang the expense

Investing in art successfully strikes me as one of those notions that’s great in theory but difficult to achieve in reality.

The upside is obvious: art, and especially modern art, has been an enormous success in the past couple of decades, possibly even edging into bubble territory for some leading contemporary artists. Talk to experts such as Bernard Duffy at Emotional Asset Management and he’ll tell you that art as an asset class has been a superb performer in relative terms over the past few decades, and that in his very diversified portfolio of collectable assets, modern art (as compared with, say, stamps or Stradivarius violins) comprises 40 per cent of the total assets.

Between 1978 and 2008, modern art grew in value by an average of 11.28 per cent, according to Duffy and the Fine Art Fund. That compares with stamps, which increased by 4.6 per cent a year and stocks and bonds at 8.7 per cent a year – although that impressive growth came via some pronounced volatility in pricing.

Equally, if we look at the Art 100 index from Art Market research, we see that between 1998 and 2008, art as an investment category pulled in 11.5 per cent per annum whereas modern art stormed ahead with growth of 17 per cent per annum.

But back in the real world inhabited by you and me – not the Russian oligarchs or those with “family” money – art and especially modern art is almost completely out of our reach.

This accessibility problem helps explain why stamps, for instance, are so popular, if only because an ordinary investor can hope to buy a decent “quality” asset for a few thousand pounds. It’s a similar story with coins – our very own FT Money My Portfolio columnist Peter Temple is a great fan!

Yet that accessibility issue also counts against stamps (and to a lesser degree coins). Modern art is especially popular because it is constantly evolving and the supply of new collectables is potentially endless.

More important, there’s a huge variety of dealers you can turn to to establish a decent secondary market price. In the stamp world, by contrast, the investment market is dominated by Stanley Gibbons, which represents both ends of the trade. Art, in sum, is terrifically popular and fairly egalitarian (in its lower reaches, at least) and, if nothing else, does at least look good on the wall. That’s why Will Ramsay of the Affordable Art Fair is probably right when he says of modern art that you should: “Just buy it because you love it. Don’t worry about what you should buy.”

But call me old-fashioned: I’d still like to buy something that looks good on my wall and is a good investment.

I find myself drawn to a more adventurous strategy, namely buying up-and-coming artists who might make it big.

Hopefully, rather like all adventurous investments, I might be able to use a modicum of intelligence, a dash of gumption, a smidgeon of due diligence and invest in someone who might be hugely collectible in the future.

Or at least that’s the theory behind my latest small adventure!

Over the next three years I intend to acquire a small portfolio of modern art that works for me but is also a good investment. As I’m an impoverished columnist, I don’t intend to sell the family jewellery as I’m only investing an affordable £1,500 per annum.

My guide through this slightly intimidating world will be Sarah Ryan, founder of an online gallery called Newbloodart. Ryan’s internet-based business is clearly first and foremost a personal adventure for someone who loves talking to new artists but she also reckons “emerging art” can be a good investment – if you’re lucky and smart. Ask her to list successful new artists who have “emerged” through her online gallery and she’ll reel off examples such as Josie McCoy, whose work was worth £250 at graduation and is now worth 10 times that amount.

Or Iain Andrews, whose “Bartolome the Fruitseller” was valued at £700 online but within four days was worth £2,000. According to Ryan, the advantage of investing in this emerging art is that “nothing at the start of an artist’s career tends to be too expensive!”.

According to Ryan, some of the best places to find emerging art are at mid-term and end of year degree shows in art colleges across the UK.

But simply finding a new artist is only one part of the challenge – collectors and investors need to consider whether the artist has staying power. “The artist’s commitment to their practice is the single most important factor to evaluate,” argues Ryan. “To invest wisely is to bank on the fact that this artist will be creating work in 10 years’ time.” For example, she suggests selecting artists who have done an MA, which demonstrates commitment.

Ryan also suggests that investors check for “archival” properties. “It is important to discern not only the quality of artists but the quality of the objects they produce,” she says. “Paintings run the risk of the frame warping or the paint fading – and poorly made objects make poor investments.”

Yet all this talk about practicalities shouldn’t blind one to the key strength of any artistic work – its aesthetic force. According to Ryan, investors should look for an artist who has an identifiable style. “We would be reluctant to purchase a body of art if the artist could not discuss it fluently, with insight and clarity,” she says.

So much for the theory – over the next few years I’ll be testing whether it is possible to build an investment portfolio of emerging artists. If nothing else, I might buy some works I like. Off to the MA shows!

adventurous@ft.com