Investment on the wall

(1)If the word investment makes you think only of shares, bonds or equity funds, you are missing many opportunities. Shrewdly purchased artistic work can generate more money for you than securities.

Iva Nesvadbová

At the present time, art is not often included among investments in this country. The reason is simple: while trading on the exchange is understandable and can be read about in the newspaper or consulted with a broker, collecting art is not so easy. It is necessary to be well-oriented with the market to be successful at investing in art. However, efforts exerted will certainly provide a good return, as yields can reach tens of percent a year.
Those interested in investing are advised to go to galleries and exhibitions (even at state institutions) and to visit several auctions. The older auction catalogues can help in getting acquainted with the development of prices. Iva Nesvadbová of the Gambit gallery recommends spending half a year monitoring the market, after which the potential art investor should select a few galleries that best suit him. Since you will probably purchase works you wish to display at home, the most important thing is that you like them. Start small – a graphic art piece can cost from six to thirty thousand crowns. If you wish to invest more, or once you get a better feel for the market, you can choose more expensive paintings that will set you back anywhere from twenty thousand up to hundreds of thousands of crowns. Sculptures are the most expensive artwork, starting from fifty thousand and pushing upwards to millions of crowns.
Galleries and auction houses are the best places to make a purchase. Galleries often represent several artists, sometimes on an exclusive basis. If you are interested in the work of a particular artist, you should begin in “his” gallery. Auctions are another option. They are mainly held in the spring and autumn and are usually focused on Czech modern art or art from the 19th century. Contemporary art seldom lacks the potential to fetch enough money to be the focus of an entire auction.

Jan Nízký

Up to 30% a year, risks attached

With each investment, a suitable combination of yields, risk and liquidity is sought. Art needs time to increase in value. According to Nesvadbová, the shortest possible time horizon is five years. During this time, a well-chosen work can reach a growth in value of one hundred to three hundred percent (15 to 30 percent per year). David Kmínek, of the Behémót gallery, cites the paintings of Martin Mainer as an example. In the mid nineties, they sold for CZK 50,000 (for a mid-sized painting) and today they are worth hundreds of thousands of crowns. But don’t forget the reverse side of investing – similar to other investments, the higher the yield, the higher the risk. Contemporary art promises the highest yields. However, the talented and currently fashionable artists can fade into oblivion within a couple years, so the resulting yield can also be negative. If you prefer more conservative investments, choose verified artists, the best being those that are dead. True, the yields will not be extremely high, but it will certainly be interesting and less of a risk. Another way to reduce the risk is diversification – purchasing many works from various artists or, if you are collecting only one artist’s work, from several creative periods.

David Kmínek

As with shares or funds, it is important with art to bet on the right horse. Determining this is the difficult question. According to Kmínek, one indicator could be whether the author is represented in the National Gallery or if he was awarded the Chalupecký (a prestigious award for young artists under 35), or if the institutions (such as banks) are buying his work. In the future, estimates and recommendations by experts should serve as a kind of guide. The Behémót gallery asked six gallery owners, as well as artists and critics, to estimate the risks and yields for twelve artists it represents. The most favorable evaluation went to Adriena Šimotová. According to evaluators, the risks associated with her work were virtually none and expected yields were around 150% after five years and almost 500% after fifteen. According to Nesvadbová, there are several other artists in this country with the same potential as Adriena Šimotová, including Karel Nepraš, Bedřich Dlouhý and Jiří Sopko.
When seeking a suitable piece of art, the opinion of the gallery owner can be of help. A gallery owner should be a person you can trust, and let the recommendations of friends guide you as well. Besides trust, the important thing is that the works of the artists represented by the galleries appeal to you. If you purchase a work of art, you probably won’t toss it in the basement, you’ll want to exhibit it at home or in the office.

Antiques – an investment in timeIN THE BEGINNING, antiques require as much research as with art. Jan Nízký of the Dorotheum auction house suggests visiting shops and auctions and monitoring the prices. He recommends the auction catalogues from previous auctions containing final prices as an excellent guide. While these prices reflect true market prices, items in shops are frequently inflated.
The economic situation of the country strongly influences prices, too. At the beginning of the nineties, when the Czechs were afraid of inflation and the devaluation of the crown, there was much interest in antiques and gold. The price of gold coins reached a level that has not been reached since.
Nízký considers paintings, sculptures and fine porcelain a good investment. One shouldn’t expect high growth in value, they are just good protection against inflation. In terms of risk and liquidity, the best idea is to purchase top-quality items, as they are much easier to sell than average pieces.
Fashion trends and exhibitions can influence prices, too. For example, an exhibition of paintings by Josef Lada substantially increased interest in his work. If you are planning the sale of artwork sometime soon, find out first if there will be any large exhibitions of the artist, as the price of your item could substantially increase after such an event.

Don’t be rash when selling

A sale should be considered as carefully as a purchase. In the case of artists who were not too productive but are still in demand, sales can be realized within a few days. However, you could also end up waiting an entire year for a buyer. So plan your financial needs well ahead of time, and request the sale of your investment by a gallery (or auction house) at the appropriate time. Auction houses and galleries which represent a particular artist are the best way to get the money, as they will know many interested collectors and the sale can be concluded within a very short period of time.
While collecting art in advanced countries is a normal practice among the middle class, until recently it was only a hobby of intellectuals here. However, this fact can mean real potential for future growth. The good economic situation and the necessity “to have something on the wall”, preferably from a well-known artist, can generate immense demand, putting pressure on value growth. This pressure could be similar to that which occurred after the November revolution. Many works that were traded for thousands and tens of thousands of crowns in the mid-eighties are today ten times more expensive.
The return of institutions could also have a positive influence on the market. In the first half of the nineties, banks were significant buyers; they helped to maintain the market and many galleries survived on their money alone. Then the break came. Banks and other institutions deserted the market and have not yet returned. When their interest is sparked again, it will contribute to the development of the market, to an increase in prices, and so to a growth in the value of your investment.




Auction houses onlineDorotheum – · Behémót – · Meissner Neumann – · Antikva Nova Praga – · Forum 9 / 11 – · Jiří Švestka – · Bayer & Bayer –
Auctions planned until the end of 2002

Dorotheum: 12. 10. – plastic arts, 30. 11. – antiques and art auction
Meisner Neumann: 28. 9. – art and antiques, 9. listopadu – plastic arts, 14. 12. – art and antiques
Antikva Nova Praga: 24. 9. 2002 – art and antiques
Forum 9 / 11: 14. 9. – plastic arts.

Put your money under the mattressWhen you come back from vacation with pockets full of leftover dollars, euros, kunas or Swiss francs, what should you do – save them or exchange them for crowns?

Tomáš Skřivánek
Photo: V. Vlk

Czech currency will get stronger during the next few years. This is a fact on which practically all economists agree, whether they support the current government or not. The Czech National Bank (ČNB) predicts an average strengthening of the crown by 3.7% per year. So, if the euro now costs CZK 30.50 and the dollar CZK 31, one year later both currencies will be about one crown cheaper. According to ČNB, the ratio should be 26 crowns per euro by 2006.
With this prognosis in mind, it does not make any sense to keep a lot of cash in a foreign currency. Investment theory states that people should keep most of their money in the currency they assume they will spend most in the future.
The problem of leftover money after a vacation cannot be resolved by depositing it in a foreign currency account, whether it be a current account or term account. The interest is more than heart-rending and the bank takes a minimum of 1% whenever it pays you in cash. And so your euros, dollars and Swiss francs would have to “work” an entire year just to pay off this fee.
When you go on vacation, you don’t take thousands of dollars or euros with you, perhaps just a few hundred. If you’re willing and able to pay with plastic, then the best thing you can do is save the foreign currency at home until next year. To your foreign currency, sclerosis is more of a danger than the strengthening Czech crown.
By exchanging foreign currency to crowns and then buying it back again before your next trip, you lose at least 5% (up to 8% in the smaller exchange offices), which is probably more than the crown will strengthen in one year. What’s more, having a few hundred euros or dollars at home will be beneficial for your psyche – your next vacation won’t seem so far away, and you’ll be all set to get going again.

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