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New wealth is redrawing the art world map, and the centres of its universe have moved to Russia, China, India and the Middle East
On a Wednesday evening in early May a middle-aged man wearing a blue blazer walked into Sotheby’s in Manhattan, collected a bidding paddle and followed an usher to a seat near the back of the room. High rollers looking to indulge in some art are normally ensconced in private boxes or, at the very least, seated down the front where they can twitch discreetly at the auctioneer. But that didn’t stop the mysterious man with a foreign accent from making vigorous use of paddle no. 1430 at the auction house’s Impressionist and Modern Art sale.
First, he paid $US5 million ($6.5 million) for a Monet landscape, $US2 million over the estimate. Then he relentlessly waved off the bids of three US billionaires to land Picasso’s 1941 portrait of his lover Dora Maar. It wasn’t just the $US95 million price that stunned the room, even though it was almost twice the estimate and the second-highest amount ever paid for an artwork at auction. "He looked like he’d never been to a sale before," sniffed one observer.
Three days after the auction, The New York Times carried the man’s picture under the headline ‘Recognise This Man? The Art World Doesn’t’. Months later, the art world is still guessing the identity of the novice collector. But the mystery buyer is generally believed to be Russian, given his accent, take-no-prisoners bidding style and the enormous amount of money he could spend on a painting.
Since the collapse of communism in the early 1990s, Russia’s vast oil and gas assets have fashioned a new class of absurdly rich entrepreneurs. According to Forbes magazine, Russia is currently home to 33 billionaires who have a combined net worth of $US170 billion, up from $US91 billion in 2005. Having lavished their money on huge mansions, yachts and the odd sports club, the oligarchs are now turning their attention, and spending power, to that other signifier of mega wealth.
They’re not alone. Art has long been a rich person’s pastime and every age has its mega collectors. But in this era of astonishing wealth creation, there are more rich people than ever before: about 8.7 million people held assets of $US1 million or more in 2005, while the number of those with financial assets of more than $US30 million shot up to 85,400, according to the 10th annual world wealth report produced by consultants Capgemini and investment bank Merrill Lynch.
The world’s wealthiest continue to grow richer: Forbes’s annual ranking of the very richest people on the planet had a record 793 billionaires on its list this year. And more newly wealthy people are interested in buying art. The 2006 list of the world’s top 200 collectors, published by the influential New York-based ARTnews, featured a multitude of entrepreneurs whose fortunes stem from financial services, IT or the emerging market economies of the East and Far East.
The result is a spike in art prices and an auction-room feeding frenzy not seen since the heady days of 1990 when Ryoei Saito set a world record, paying $US82.5 million for Van Gogh’s Portrait of Dr Gachet. The Japanese industrialist suffered a reversal of fortune after buying the work, as speculative buying in the impressionists category, much of it by Japanese corporate buyers, caused prices to collapse. But the auction houses are confident that today’s market will remain strong, with many art categories doing well and the geographic spread of buyers much wider than before.
While rich Russians, and their counterparts in China, India and the oil-rich nations of the Middle East, are fuelling an extraordinary boost in the prices for their national art, their wealthy collectors are also making their presence felt in other art categories. Jussi Pylkkanen, president of Christie’s in Europe, says there are now four times as many fine-art buyers as during the 1980s boom. "Everyone is talking about the Russians, the state of the global economy and buyers from places such as Asia and the Middle East."
Like its rival Christie’s, the boom has been good to Sotheby’s. In August, the auction house, which is listed on the New York Stock Exchange, resurrected its dividend to shareholders, cancelled six years ago in the wake of a price-fixing scandal that nearly caused its collapse. In the first six months of this year, Sotheby’s reported $US1.5 billion in global sales, a 52 per cent increase on the first half of 2005. But it has yet to catch up to Christie’s, which recorded a 38 per cent rise in first-half-year sales to $US2.13 billion.
While the two auction houses together brought in more than $US1.1 billion at the autumn sales in New York, Christie’s shattered the record for the highest-grossing single auction with its $US491 million sale of impressionist and modern art in November. A week later, it again made auction history, selling 64 works of contemporary art for almost $US240 million.
Cash, and lots of it, may have allowed nascent collectors to muscle their way to the top of art dealer and auction house lists. But the new class of super rich doesn’t tend to play by the old rules of the rarefied world of art. While they are willing to pay a premium for artworks they want to possess, many of today’s big buyers are less likely to see those works as purchases for life.
"There’s less and less of that depth of connoisseurship, of people devoting their lives to collecting an æsthetic type of art that their families will pass down through the generations," says Patricia Kontos, Australian representative for Christie’s in Melbourne. Even the term ‘collector’ has become a misnomer, according to Leonard Lauder, US cosmetics billionaire and doyen of New York’s art establishment. "It’s just a desire to possess the latest, to say, ‘Look what I have on my walls’."
When Alexis de Tiesenhausen started working at Christie’s in 1984, Russian painter Zinaida Serebriakova used to be known as ‘the kiss of death’. "A work by her would barely fetch the reserve or it wouldn’t sell," says the Frenchman, of White Russian extraction, who now heads the auction house’s Russian department. "Ten years ago, her female nudes would fetch, at the most, £6,000. But in April this year, we sold one for £1.2 million. And why? Because everyone wants her now."
Russia’s oligarchs have certainly had an impact on the prices of their native art. Last December, Christie’s got $US2.9 million for a 1919 nude by Boris Kustodiev, seven times its top estimate and more than 85 times the sum paid when it last sold at Christie’s in 1989. Such sales have helped turn a niche category into the world’s fourth highest-grossing art market. At Sotheby’s, auction totals for Russian art soared from $US7.6 million in 2000 to $US106.2 million last year – and sales had already reached $US111.9 million by June, 2006.
Rich Russians may be willing to spend big sums to reclaim their cultural heritage, but they are selective buyers, says de Tiesenhausen. "Talking about the right painter doesn’t mean anything. It’s the right date, the right condition and the importance of the work in the life of the artist that are extremely important for Russian collectors."
It’s a lesson some dealers have yet to learn. By the time he died in 1985 at the age of 97, Marc Chagall was best known as the Russian painter who had oversupplied the world with whimsical images of floating lovers, roof-perched fiddlers and brightly hued chickens and goats. Unlike other early 20th century modernists, whose work matured with the years, Chagall reached his full potential at an early age. But no one seems to have told many of the international art dealers who participated in the third annual Moscow World Fine Art Fair in May this year.
Scores of late-period Chagall works were included in the s2 billion ($3.3 billion) worth of art, artefacts and jewellery on display in the Russian capital. Organisers seemed bemused by their ubiquity. "European dealers think any Chagall will do well here, but most of his work has remained unsold," said Sixtine Crutchfield, general manager of Art Culture Studio, the Geneva-based company that runs the fair.
A few dealers, at least, succeeded in avoiding the stereotypes. Benoît Sapiro, a Paris-based specialist in the Russian avant-garde, sold most of his stand on opening night – including a 1914 Chagall which went for s3 million. "Russians are spending up to buy back their patrimony, but they are not idiots," he says. "They are very hard businessmen and they negotiate a lot."
Collectors from the East and Far East once had to come to London or New York to bid for art to adorn their enormous homes. Now the market comes to them. Sotheby’s recently opened an office in Moscow, while Christie’s staged its first sale in Dubai – closing its salerooms in Australia at the same time. Says Kontos: "There is enormous growth potential in markets such as Beijing and Dubai and resources need to be utilised on expanding in those markets."
The new best friends of the international art market also include US industrialists and financiers. Steve Cohen, the Wall Street hedge fund billionaire, has reportedly spent about $US500 million on art in recent years and has a hit-list of works he wants to own. Last year, he paid $US12 million for Damien Hirst’s The Physical Impossibility of Death in the Mind of Someone Living, also known as ‘tiger shark in a glass tank of formaldehyde’. That the shark was rotting didn’t stop Cohen forking out what was believed to be the highest price ever paid for the work of a living artist – until Kenneth Griffin, another hedge fund billionaire, trumped him by spending $US80 million on Jasper John’s False Start earlier this year.
In 1987, entrepreneur Alan Bond set a new world record by buying Vincent Van Gogh’s Irises for £27 million ($67 million). The amounts local entrepreneurs are prepared to spend on their national art now seem paltry in comparison. But high-profile paintings still trigger international-style bidding wars. In April, an unnamed industrialist, reported to be David Walsh of Tasmania’s Moorilla Estate, saw off six other bidders, including the National Gallery of Victoria, to capture The Bar by John Brack for $3.15 million, an Australian record.
Mark Fraser, who heads up Sotheby’s in Australia, likens such collectors to "big game hunters". "They want the big … artworks that others will recognise as being important." But unlike 20 years ago, when "new money would throw their dollars at anything, people who buy now are well educated and they do their research. There’s not that sense of nouveau-riche cringe. The truth is many of these IT guys would probably have ended up being low-grade clerks in previous eras. But in this era, the guys who had obsessive little hobbies have made a lot of money; they know enormous amounts about what they are doing and they are very, very smart."
In recent years, demand for new asset classes has extended to art – and some investors don’t even seem to care if their paintings never leave the vaults in Switzerland’s free ports. Philip Hoffman, a former Christie’s director who now runs the London-based Fine Art Fund, says his clients "have no interest whatsoever in art. They’re looking at paintings as a diversification of their investments."
While a host of similar funds has sprung up on both sides of the Atlantic, success has been blotchy at best. Unlike shares and bonds, paintings generate no income and transaction costs can be hefty, with auction houses typically charging a 20 per cent buyer’s premium. Then there are storage costs and insurance to consider. But whatever the fees, the turnover in artworks continues to accelerate.
Says Fraser, "It used to be an auction room adage that a work had to be off the market for at least five years before it could be put up for sale again. That old rule of thumb has gone. Now things will trade in a one-year period."
A century ago, US industrialists such as Henry Clay Frick sought social cachet by spending great sums on a roll-call of old masters. Art still serves as a barometer of power and status. What could be more prestigious, after all, than having a Picasso adorning the wall above the sofa? But most of today’s art buyers are opting for works by more modern masters. Contemporary art is currently the most glamorous art category that money can buy. "It suits today’s architecture and interiors," says Kontos, "and it’s much more accessible because it is being produced in the here and now. How easy is it to acquire Canaletto or a Rembrandt?"
Some commentators warn that the boom in contemporary art is unsustainable. But buying fresh art has always been a wager, with the challenge being to pick the names that last. And artists such as de Kooning and Mark Rothko appear to have become as blue chip as their predecessors. In November, De Kooning’s 1977 abstract, Untitled XXV, broke the auction record for any postwar work of art when it sold for more than $US27 million at Christie’s postwar and contemporary art sale in New York. A small (28.3 cm by 19.5 cm) preliminary study on paper by De Kooning also doubled its high estimate to bring in $US9.64 million, signalling that some contemporary artists are now being regarded in a similar light to impressionists and old masters.
But new art enthusiasts may also be starting to stretch their wings. Fraser points out that Gunter Sachs, a German industrialist and major buyer of contemporary art, recently forked out £5.2 million pounds for a work by Pieter Brueghel the Younger, "so we are seeing eclecticism creeping into the market".
The rise and rise of contemporary art has spawned another phenomenon: the omnipresent art fair. "They are popping up everywhere like a bad disease," says New York-based private dealer, Luba Mosionzhnik. "If I went to all of them, I’d be on the road for around 260 days of the year." Samuel Keller, director of the prestigious Art Basel in Switzerland and its party-fuelled spin-off at Miami Beach, has summed up their appeal as "one-stop shopping".
Also on offer is a ready-made social circuit. "It’s the hot new event and people go to be seen," says Kontos from Christie’s. "But those open to the public also give people the opportunity to see lots of different artists in one location. That’s why they are so successful."
Moscow, however, would seem an improbable choice for a major art and antiques fair. Onerous customs regulations prevent any artwork produced more than 50 years ago from leaving the country. Then there’s the hefty 18 per cent tax rate on outward-bound art. And there’s the fact that Russia’s rich have made London, already an international art centre, their second or even first home, prompting the UK capital to be branded ‘Londongrad’.
Despite such obstacles, in 2004 the Zurich-based Art Culture Studio launched the Moscow World Fine Art Fair. While regulations prevented anything being sold that year, by September 2005, restrictions had been relaxed and a cluster of leading international dealers descended on the capital to plumb the depths of the art world’s new frontier.
But many participants found conditions tougher than they had expected and, at this year’s fair, some major players stayed away. Organisers said the fair had "evolved", with a new focus on local galleries and jewellery. But the absence of big-name dealers also appears to be due to the fair’s challenges and moderate, if any, returns.
Still, with a growing client list in Moscow, Mosionzhnik sees the fair as a "long-term investment". So too does Paris-based Jacques de la Béraudière, a three-time attendee. Two days into the fair he said, "We have had a lot of curiosity, a lot of questions, a lot of missed appointments, but so far no sales. But Russians collected for generations and we don’t see why they should not do so again."
While tycoons, officials and socialites flocked to the fair during its ‘VIP’ hours, language barriers made it difficult for international gallery owners to spot the oligarch in their midst. Certainly some visitors attracted attention, such as the fur-swathed woman who stalked the aisles, surrounded by bodyguards. "She looked like the White Witch of Narnia," recalls Sabina Fay Braxton, a Paris-based English artist whose textiles feature in the homes of the rich and richer.
Fair manager Crutchfield admits it’s difficult for dealers to know who is on their stand. "In 2004, I met a lot of people and I had no idea who they were. We took their cards and it was usually their chauffeur’s card or their bodyguard’s card. But we find that the ones that buy [here] are usually not the ones who dress head to toe in brands and walk around with bodyguards."
It’s a lesson that dealers in more established markets have also had to learn. Says Braxton: "We all know the story of Adriane, the Paris art dealer who, fed up with the scruffy guy who kept asking the price of everything in her store, said, ‘Listen, you can’t afford it so you should just go somewhere else’. As soon as he left, another dealer rushed in and said ‘So how many deals did you make with Bill Gates?’"
Buying into the new
For years, the work of Zhang Xiaogang was deemed too edgy, and politically suspect, to be shown in his native China. But in April, Zhang’s Bloodline Series: Comrade No.120, a painting featuring a young Mao soldier with a watermark across his face, sold for $US979,200 (about $1.3 million) – more than double the high estimate of $US350,000 and the highest price paid at the inaugural contemporary Asian art sale at Sotheby’s in Manhattan.
China’s contemporary art scene is sizzling as newly wealthy Chinese vie with international buyers for the works of their country’s increasingly collectable young artists. The Sotheby’s New York sale ran out of catalogues, and telephone lines, as about 150 bidders worldwide vied for lots. Expected to realise about $US8 million, the sale brought in $US13.2 million with a clearance rate of 95 per cent.
New wealth is also driving the market for Indian art.
In March, Christie’s sold $US15.6 million of modern and contemporary Indian art in New York – double its presale estimate. Expatriate Indians started the buying spree: last year, Rajiv Chauhuri, who heads a New York hedge fund, paid about $US1.6 million for the Tyeb Mehta painting Mahishasura, also a record for an Indian work. But local buyers such as the Ambani family, who own Reliance Industries, have been taking a higher profile at auctions this year.
By contrast, Russia’s market for contemporary art has been rather muted since Sotheby’s groundbreaking sale of Soviet art in Moscow in 1988. "You didn’t have Russian buyers then, so the boom was basically Gorby mania," says Alexis de Tiesenhausen. Some observers say its development has been hampered by a lack of state support. For others, it’s the old-fashioned art institutes that have left graduates ill prepared to sell their art. There is, however, a relative dearth of contemporary art collectors in Moscow. "We have a club of collectors but … not many members," says Vladimir Levashov, art director at Stella, a Moscow gallery.
But Jo Vickery, head of Sotheby’s Russian art department says it’s "inevitable that interest in contemporary Russian work will grow". Until then, ambitious Russian artists may have to make do with clients such as Umar Djabrailov. At this year’s Moscow World Fine Art Fair, the Chechen hotel magnate is believed to have bought Assemblage, – a glittering mixed-media sculpture of an Amazonian woman walking two dogs – on condition, says a local contemporary art dealer, that artist Nikita Gashunin "make another girl with two dogs so he will have a set for his living room".
The world’s wealthiest continue to grow richer: Forbes’s annual ranking of the very richest people on the planet had a record 793 billionaires on its list this year. And more newly wealthy people are interested in buying art. The 2006 list of the world’s top 200 collectors, published by the influential New York-based ARTnews, featured a multitude of entrepreneurs whose fortunes stem from financial services, IT or the emerging market economies of the East and Far East.
The result is a spike in art prices and an auction-room feeding frenzy not seen since the heady days of 1990 when Ryoei Saito set a world record, paying $US82.5 million for Van Gogh’s Portrait of Dr Gachet. The Japanese industrialist suffered a reversal of fortune after buying the work, as speculative buying in the impressionists category, much of it by Japanese corporate buyers, caused prices to collapse. But the auction houses are confident that today’s market will remain strong, with many art categories doing well and the geographic spread of buyers much wider than before.
While rich Russians, and their counterparts in China, India and the oil-rich nations of the Middle East, are fuelling an extraordinary boost in the prices for their national art, their wealthy collectors are also making their presence felt in other art categories. Jussi Pylkkanen, president of Christie’s in Europe, says there are now four times as many fine-art buyers as during the 1980s boom. "Everyone is talking about the Russians, the state of the global economy and buyers from places such as Asia and the Middle East."
Like its rival Christie’s, the boom has been good to Sotheby’s. In August, the auction house, which is listed on the New York Stock Exchange, resurrected its dividend to shareholders, cancelled six years ago in the wake of a price-fixing scandal that nearly caused its collapse. In the first six months of this year, Sotheby’s reported $US1.5 billion in global sales, a 52 per cent increase on the first half of 2005. But it has yet to catch up to Christie’s, which recorded a 38 per cent rise in first-half-year sales to $US2.13 billion.
While the two auction houses together brought in more than $US1.1 billion at the autumn sales in New York, Christie’s shattered the record for the highest-grossing single auction with its $US491 million sale of impressionist and modern art in November. A week later, it again made auction history, selling 64 works of contemporary art for almost $US240 million.
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