Art sales records shattered with global rise of billionaires

The super-rich from emerging markets have pushed art prices to record highs

The bidding during Christie's auction for the 1969 painting by Francis Bacon, "Three Studies of Lucian Freud" in New York.

A new class of art connoisseurs from the developing world is taking the global art market by storm, phoning in bids to Christie’s and Sotheby’s and shipping works out to every corner of the globe.

This past week auction houses held their largest sales of all time. To great fanfare, Christie’s sold Francis Bacon’s "Three Studies of Lucian Freud," a triptych depicting the late artist’s close friend from different angles, for a record $142.4 million.

In the same sale, the New York-based auction house set the record for the most expensive work by a living artist when it sold Jeff Koons’ giant steel sculpture, Balloon Dog (Orange) to an anonymous telephone bidder for $58.4 million.

Art market analysts attribute this last week’s sky-high price tags to the emergence of this new class of super-wealthy art collectors from Asia, the Middle East and Latin America who are looking to invest their excess capital in the most collectable — and enjoyable — speculative commodity: art.

Jeff Koons' Balloon Dog (Orange) sold set the record for most expensive auction of a living artist's work.

"It's not a function of art being better than it was. It’s a function of extreme amounts of excess capital combined with cheap money," much of it coming from emerging economies like China, Qatar, Brazil and India, said Todd Levin, an art adviser and the director of Levin Art Group.

"The bottom line is there's an extreme amount of wealth aggregated in the hands of a small number of individuals, and they have to find a place to put it," he said.

The world has emerged from a global financial crisis with more billionaires than ever in 2013, according to the Wealth-X and UBS Billionaire census released last week, which counted 2,170 billionaires globally.

With more billionaires on every continent, and Asia on pace to outstrip North America and Europe in that department within five years, the days of American financiers dominating elite art sales are long gone.

Wealthy collectors from emerging economies, boosted in recent years by booming commodities prices, are taking center stage at auction houses from New York to Shanghai.

“This was our absolute record sale,” said Miety Heiden, head of contemporary private sales for Sotheby’s, who spoke to Al Jazeera just moments after another night of bidding came to a close. “We saw bidding from all over the world, and a lot of new collectors.”

Auction houses are courting these super-wealthy patrons, and it’s paying off in record sums. Christie’s, which makes an effort to tour big ticket works around the world to tempt potential bidders, netted $691 million from its Tuesday night postwar and contemporary art sale, the largest sale by auction of all time.

“It used to be very much an American and European marketplace, but it’s growing more and more global every day,” said Amy Cappellazzo, a chairman of postwar and contemporary art for Christie’s.

Christie's registered bidders from 42 countries for its blockbuster Tuesday sale.

A sound investment

Francis Bacon's "Three Studies of Lucian Freud" fetched the most at auction of all time.

Christie’s says these international collectors are captains of industry — sophisticated art buyers with deep pockets and a taste for contemporary art — from places like the Arabian Gulf, East Asia and Latin America.

But the auction houses can’t reveal any more than that. Most collectors bid anonymously through dealers charged with protecting their clients’ privacy, so their identities remain unknown.

Yet while their names are hidden, their motives are not. Like their old money counterparts, the world’s nascent billionaires are driven, in part, by the competition and vanity of art buying.

Art auctions and the international art fairs that complement them — in Basel, Miami, Paris — provide the world’s elite with an opportunity to rub shoulders and discuss art as they augment their collections.

“The art world has become this central thread for people of this ilk to come together,” said Marion Manaker, the publisher of Art Market Monitor and president of the Art Compliance Company. In part, he said, “that’s why you’re seeing these prices go up.”

But world-class art also presents a valuable investment opportunity, analysts and auctioneers say.

“If you look at the fall of '08 to today, anyone who bought art and paid record prices has come out way ahead,” said Cappellazzo of Christie’s. “So the metrics have proven the art market is solid in that way.”

Contemporary art by blue chip artists like an Andy Warhol — whose reclusive painting "Silver Car Crash (Double Disaster)" smashed the artist’s record when Sotheby’s sold it for $105 million this past week — is a sure bet to appreciate in value. Art has proven to be a recession-proof alternative investment, especially in the turbulent emerging economic zones that are churning out dozens of new billionaires every year.

Jeffrey Gundlach, chief executive officer and chief investment officer at investment management firm DoubleLine and an avid art collector, told Reuters the high-end art market is being driven by "a tiny fraction of the population in certain emerging economies" where people "don't trust their currency and don't trust the stability" of their economies.

Billionaire art collectors themselves have been steadfast through difficult economic times. The Wealth-X report found that the world’s billionaires added $226 billion to their assets since the 2009 global financial crisis. During the same span of time, 810 new billionaires were created worldwide.

Heiden says Sotheby’s clients regularly inquire about the investment potential of works they are considering, but she says that shouldn't be the only reason a collector raises his paddle at a high-stakes auction.

“They ask us questions and we tell them that first of all they need to enjoy it, but second of all it can be something that will keep its value or go up in value,” she said.

Art gets global

Andy Warhol's "Silver Car Crash (Double Disaster)" set an artist record for the perennial auction stalwart

Yet while the auction houses are booming thanks to this emerging class of collectors, art critics worry what these new collectors mean for the world’s most treasured art.

Since no one knows who most of these bidders are, no one knows where all this art is headed either.

“When art gets global like this, the real question is: Where does the public get to see it?” said Art Market Monitor's Maneker.

While the hedge fund managers of New York and London can be relied upon to lend famous works to museums for public viewing, these new collectors are something of an unknown quantity.

The fantastically wealthy Qatar Museums Authority encapsulates this uncertainty. The QMA is undertaking a massive campaign to vault the tiny oil-rich nation into the global art spotlight, but is notoriously tight-lipped about its estimated $1 billion per year art buying spree.

“We are revising ourselves through our cultural institutions and cultural development,” said Sheika al-Mayassa al-Thani, chairwoman of the QMA and ArtReview’s most powerful person in art for 2013, in a 2010 TED Talk. “Art becomes a very important part of our national identity.”

The QMA has snatched up works by Bacon, Warhol and Koons — all artists featured in record sales this past week — but could not be reached for comment about whether it had bid.

And while Qatar has opened Mathaf, an Arab art museum, and the Museum of Islamic Art, designed by I.M. Pei, neither is somewhere you’ll find a giant metallic balloon dog by Koons or pop art from Warhol on display. The art world is wondering where these works, including a Cezanne the QMA is believed to have bought for $250 million in 2011, will wind up.

A former employee at Bonhams auction house, who wished to remain anonymous, told Al Jazeera that international buyers, including many from the Gulf, would regularly purchase large quantities of expensive art and not collect it for months at a time.

A collector's world

Even as museums pop up around the world — in Qatar, Turkey and China, for example — there is no question that the landscape has changed as private collectors with seemingly endless resources dictate where high value art lands.

Levin says that private collectors have become the most dynamic force in the art market these days, putting themselves in direct competition with museums by opening their own institutions.

"Now, museums are dependent on ultra-high net worth individuals," who push the price of art through the roof, said Levin. In the past, critics or curators were the ones deciding which works of art were most desirable, but today collectors hold that power, he said.

To be fair, museums have never been a mainstay in auction house sales. A museum’s board of trustees needs to meet and approve curators’ requests for new art, and the fast-paced, unpredictable nature of auctions does not suit their tight budgets.

But with prices skyrocketing into nine-figure sums, even the wealthiest museums are forced out of the picture for top-billing art.

The Metropolitan Museum of Art and the Museum of Modern Art in New York declined to comment to Al Jazeera, saying that they don't discuss the international art market or how it affects them.

But for the sake of comparison, those museums, two of the world’s richest, each spent between $32-39 million on acquisitions for the fiscal year ending in 2012. The record-setting Bacon, at $142 million, fetched double their combined annual budgets.

Not that they would have been interested. Some critics bemoaned the fact that the world’s most expensive painting might not resurface from a private collection for many years, saying that it instead belonged in a museum, but Maneker said those concerns are misplaced.

“You put something in a museum because a scholar or curator has made a choice that this work represents an important moment in an artist’s career or in art history, not because someone spent a lot of money on it,” he said.

Besides, even in the super-elite world of billionaire collectors, museums still have a role to play. Work featured in the world’s preeminent museums is likely to gain in value, just as a work of art’s provenance — the list of previous owners — can boost its price.

“If it’s purchased by a museum, people see it as a mark of distinction,” said Heiden. In the same way, it can behoove a private collector to have her prized investment shown at one of the world's great museums.

Capellazzo suggests that with time the market will guide works where they need to be. The public tends to gain access to these privately held works at some point, she said, even if they are holed up halfway across the globe.

“I think all art finds its natural way into the world,” said Cappellazzo. “These great masterpieces, no one really owns them. You’re just a caretaker.”

Al Jazeera

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