African fine art as a portfolio diversifier

Stepping outside the standard alternative asset management allocation strategy buckets, a lively conversation with Freda Isingoma of KIISA Art revealed the potential of African and diaspora art as not only a source of cultural engagement but as an asset class.

KIISA was founded by Isingoma, an entrepreneur and ex-investment banking professional who has worked in multinational and leading investment institutions in London, New York and Cape Town. She has experience in establishing successful business initiatives as well as managing investment funds. This includes her role as a venture capitalist for an award-winning team at Close Brothers Group (U.K.) and African Investment consultant at Nile Capital Management based in New York.

Isingoma’s passion has been collecting Contemporary African and diaspora art from countries including Nigeria, South Africa, Kenya, Mozambique, Egypt, Benin, Uganda, Ethiopia, Senegal, the U.S. and the U.K.

In 2015, after completing a course in “Curating Contemporary Art” at the University of the Arts London, she realized that her passion for African art deserved a wider platform which lead to the creation of KIISA. KIISA works closely with an experienced team of art, investment and project management professionals across Africa and the diaspora with experience in curating, writing, marketing, branding, events management and financial operations and administration.

Art has long been perceived to be an investment for (only) high-net-worth individual collectors, institutions and the well-heeled in pursuit of a certain home aesthetic.

African art has long been a part of the global art narrative without being as visible, but is a genre responsible for spearheading early European Modern art movements, like Cubism, Fauvism and Expressionism. It inspired artists like Picasso, Matisse and Gaugin, but with little recognition. African art has often enough been housed outside the continent, in western public museums, or in major private collections in Europe.

Gallery (click images for full size)

Currently, artworks from African and diaspora artists only make up a small percentage of the permanent collections held by prominent western museums.

In this most recent interview, Isingoma quite generously shares her knowledge of emerging African art as a category within the overall landscape of art investing.

Vailakis: Thank you Freda for agreeing to engage with Alternatives Watch readers.

News earlier this year that the Tate and MoMA were beefing up their African art collections should bode well for emerging African art as an investment, as demand tends to drive prices up. Please speak to increased, perhaps overdue, international institutional interest in African art.

Isingoma: Although there has been some movement to acknowledge the contribution of African and diaspora artists in both the present market and the cannon of art history, there is a still a long way to go. This is evident when looking at African and diaspora artists as a percentage of the permanent collections of the most prominent art museums in major art cities. Only 2.4% of the recent acquisitions of 30 major museums in the U.S. consists of work by African-American artists (according to a study conducted by Other Words).

Furthermore, only 0.4% of the work held in their permanent collections is produced by African artists. This compares to 8.8% for Asian artists.

This picture is very similar in the U.K. With respect to the Tate, they have been including African and diaspora artists in their programming for over 10 years. However, consistency is the issue. The Tate has tried to address this in part, with the planned exhibitions of Zanele Muholi and Lynette Yiadom Boakye this year, the amazing Frank Bowling Retrospective held last year and of course the successful “Soul of a Nation” three years ago, celebrating the contribution of African-American artists during the civil rights movement.

There has been a paradigm shift.

However, what the major western museums have failed to explore to date is the sheer breadth and width of the African and diaspora market in terms of the number of artists (particularly those who already have an established career and track record in their local markets), the many different local markets with a rich history of art, and also the variety of subject matter explored in African and diaspora art.

Vailakis: Africa is a big place — where are you seeing the most dynamic African artists emerge from and what countries support thriving art scenes by way of institutions, galleries and festivals? Is there a fully formed online marketplace as many parts of the globe are sheltering-in-place? Is the art scene blooming in new ways in Africa at this time?

Isingoma: Africa is made up of 55 countries, over 1.3 billion people, and a long history of art in different pockets across the continent. Although the classic art market, particularly focused on sculptures, was popularly produced by a few main regions in Africa, the Contemporary market is more widespread.

South Africa is the most developed art market in Africa, boasting the largest number of museums, residencies, art fairs and foundations. This includes the Zeitz Museum of Contemporary Art, the Joburg Art Fair and the Nirox Foundation.

Nigeria is the largest country in Africa by population and GDP, with a meaningful number of high-net-worth individual art collectors. While Nigeria’s art infrastructure isn’t yet as developed as South Africa’s (as the older museums in the country are few and underfunded), there are a growing number of galleries, artist run spaces and art fairs paving the way.

The Nigerian art industry is definitely blossoming and now has the most prominent art fair on the continent – ArtX Lagos, which is now in its 4th edition. Yinka Shonibare, a well-established Nigerian artist living in the U.K., is building a residency in Nigeria, focused on growing the cultural scene in the market. Notably, two hours from Lagos sits the Yemisi Shyllon Museum of Art named after Prince Yemisi Shyllon, a Yoruba prince who is one of Nigeria’s most prolific collectors and a primary donor. Yemisi Shyllon opened in October 2019 on the campus of Pan-Atlantic University in Ibeju Lekki and holds 1000 pieces.

The Congo has a more traditional art scene, with a growing number of Contemporary artists, as does Kenya, Uganda, Ethiopia, Zimbabwe, Morocco, Egypt, Ghana and Angola. Senegal’s capital of Dakar has quite a vibrant art scene hosting Africa’s most well-known biennale that showcases a wealth of talent across the continent and diaspora. Kehinde Wiley’s Black Rock Senegal residency announced 16 artists selected for 2019, its first year.

Vailakis: Please speak to art as an investment class in fund format vs. through the direct purchase of individual pieces from auction houses like Sotheby’s or direct from the artist.

Isingoma: Art as an asset is well matched with a typical private fund’s long investment horizon, buy and hold strategy, specialist investment focus and limited partnership structure. For individual and institutional investors seeking to add art exposure to their investment portfolio, art funds represent an opportunity for investors to pool their investment with others, thereby diversifying/increasing their exposure to a wider variety of art holdings. They also benefit from the expertise of art investment specialists who understand how to operate in what is generally regarded as a potentially lucrative but opaque, non-transparent and illiquid market that on the whole is not easy to navigate as a new or seasoned collector. Such structures allow participants in on the potential growth of an emerging market that they likely do not have access to in terms of artists and dealers.

Vailakis: As we go into an economic downturn, why art? And why African and emerging? Please speak to its diversification benefits as part of a portfolio.

Isingoma: Art investments are generally not highly correlated to financial equity markets. Between 2009 and 2019, the global art market (measured by sales) grew by 62%, compared to a 23% growth in the MSCI World Index over the same period. This makes art investments a valid alternative asset option for wealth portfolios that goes beyond the aesthetic and intrinsic benefits of owning art. The attractiveness of the African and diaspora art market at this particular moment in our global political history is about a depth of untapped value; in a time of economic challenge, collectors start to look for good deals.

The global art market is finally waking up to the potential value of Contemporary African and diaspora art in various pockets of the art world amongst the more well-known collectors. During downturns, the art market focuses on value, substance and opportunities. This is a time when art collectors are more open to investing in art that tells a story about the current times, almost as a way of documenting history. This is where emerging markets like the African and diaspora market stand to gain and have greater opportunity to shine. The more avid collector goes in search of value and powerful narratives, while the local collector endeavors to preserve cultural equity.

Vailakis: Please speak to the dynamic around auction house sales and pricing, considering also the impact that private collections (that may never be sold) have on the overall market for pieces that do change hands.

Isingoma: Auction houses are the main way that art is publicly traded — particularly for established and blue-chip artists. They not only validate the artist, they also confirm the value of the artist’s perceived prices and provide greater liquidity for their works.

The most obvious pain point for collectors in the art market, is liquidity. Auction houses offer both liquidity and pricing transparency to the wider public, which dealers and galleries are not obligated to disclose. As a result, auction houses provide a viable opportunity for the liquidation of art fund portfolios, based on the assumption that the wider macro environment largely supports it at the point of sale. Strategically, art funds tend to give themselves a two- to three-year window to sell down a portfolio to account for changes in both the industry and economy that might both positively and negatively impact sale values.

Vailakis: According to UBS Art Basel 2019 Report, 9% of total art sales worldwide in 2019 were executed online. Given that vast swaths of the world’s population are now sheltering in place due to COVID-19, how do you see the online art sales market evolving? Please speak to any challenges around the authentication process for pieces sold in this way.

Isingoma: Online sales accounted for $6 billion of the $64 billion art market in 2019 by value. Predictably, millennial collectors accounted for a vast majority of that market. Moreover, Instagram had already paved the way for the viewing and critique of art, way before COVID-19. We, as collectors, were forced to find alternatives ways to consume and buy art during this lockdown period, and the galleries and museums pivoted almost immediately.

This new wave towards online alternatives in the form of gallery viewing rooms and online art fair platforms, is a continuation of a blooming trend that had already started to grow (small) wings. Artsy is a pioneer in the sector.

It will be interesting to see how galleries and museums evolve their digital viewing platforms, often designed to engage art purchases. No specific model has emerged yet. I look forward to watching the growth in the online market in tandem with the rise in the video art market, a long misunderstand type of Contemporary art.

In terms of the authentication process, the main issue posed by the pandemic is the limited access to archives. Provenance professionals have had to rely on the availability of digital catalogs. The danger in this is that it creates an opportunistic gap for forgery. This in turn delays the sales process of artwork, particularly the high value pieces. That said, the bulk of the transactional exchange of Contemporary African and diaspora art lies within the primary market, which makes it easier to authenticate through direct certification from the actual artist(s).

Vailakis: What percentage of Contemporary Emerging African and diaspora buyers/investors tend to be attracted by a cultural (or political) interest in the continent and its peoples vs. straight opportunists looking to capture upside/demand?

Isingoma: This is almost impossible to conclude because of the nascent stage of the market’s evolution in terms of global recognition. Dedicated art investors engage for different reasons. Some invest because of the promise of financial returns, where capital appreciation over a fixed period is their goal. Others invest for legacy reasons. Whereas cultural equity preservation might be top of mind for some.

There are investors who invest for a combination of the reasons just highlighted. Having a mix of objectives is positive, as it serves to balance out value shocks caused by a sudden change in market dynamics as we are seeing now.

For centuries, the market has been mainly upheld by “local” buyers whether in Africa or the diaspora. By this, I mean geographically local, and also those who are familiar with the subject matter and understand the historical significance of the artworks because of the shared history. The speculative end of the market is a new phenomenon and has only started to manifest on a larger scale in the last few years.

Vailakis: As the United States represents 40% of the worldwide art market, how does demand here drive trends in other geographies?

Isingoma: The U.S. art market is a powerful force in the industry, and the size of the market is evidence of that. The origins of art fairs, the global presence of art auction houses, mega galleries/dealers and high-profile Contemporary Art collectors can be attributed to the growth in the U.S. art market. The U.S. market is undeniably seen as the pioneer of Contemporary Art’s notoriety and popularity and for the creation of different segments of the art eco-system.

However, the landscape in terms of aesthetic art trends, now has a mixed global influence because of the openness of the market. The global accessibility of art has definitely changed the game. Given that health, socio-political, racial and economic issues are also increasingly global not local, art narratives across cultures and regions are likely to be more symbiotic and interwoven than ever before.