Art for art’s sake or your wallet?

An interesting study of alternative investments in the second issue of Opalesque A Squared looked at a couple of investments that, even with our open-mindedness, we haven’t yet taken any exposure to - Fine Art and antique violins.
The claim is that “good quality art work” that comes from good or great artists and can often be acquired at a price that lends itself to an appreciation at times of as much as 40% in a year or 100% within three years. In general, in the art market, there does seem to be a correlation to economics in that in boom times art prices increase and at others they can fall. There now exist art indices - these serve as a good guide and provide an overview of the market, but these, per se, do not imply a compelling case for art as an investment class. Whether, at a micro level, asset selection can generate significant out performance is the key question here - i.e., is the art market so inefficient in its pricing that a smart art investor can consistently outsmart the market and accumulate consistent gains through well considered trades rather than just relying on an asset class that is ultimately correlated to economic fundamentals?
One potential source of alpha is the ability to source art through distressed sales. The correlations also vary from one art category to another - contemporary art exhibits the closest correlation to boom & bust cycles. There are 70 different categories - investing in “The Old Masters” has the least correlation to equities as it tends to be driven by collectors and museums that are willing to pick up the price tag even during economic downturns.
Similarities between the art and the specialist antique market are obvious. Antique stringed instruments are every bit as unique and irreplaceable items. The potential returns offered are virtually uncorrelated with any other asset class, hold steady over as great works of art. The proponents of investing in antique violins assert that the risks of doing so are low and inexpensive to hedge. Correlations exist amongst the various makers, age and condition of string instruments. As with old masters, the “antique value” of a rare collectable is partially quantifiable - even at times when demand falls there are never enough old Italian high end instruments around. Similarly a speculative value, like that with contemporary art, surrounds less known makers from this century - instruments dating back to the 1920s have already experienced this - some investors believe that there is a compelling case to “buy and hold” less familiar makers from the 1930s to 1960s until they also start to appreciate.
There are certain principles and factors used by professional art and antique instrument investors - invest in a great work by a second rate artist than a poor work by one of the greatest artists.
Have the means to acquire a diversified portfolio of high quality art (ideally private investors should have at least USD 5-10,000,000 available for allocation into their fine art holdings within their overall investment portfolios). Smaller sums such as USD100,000 could finance the acquisition of one good painting but commensurately rolls up the risk as there is no diversification. Specialist art funds generally require minima of at least USD250,000. For lower budgets, a minimum of USD30,000 could be sufficient to start to invest into antique string instruments, which can also be acquired through syndicates or participation in an investment trust. Specialists can structure syndicates as investment vehicles to support and fund the acquisition of music instruments.
Targeted returns from art tend to be stated as between 10-15% annually compounded over a span of 3 - 7 years. With investments in contemporary art - returns can be between 20% and 100% in a year. Since launch in 2004, the Fine Art Fund has achieved an annual return of 58%. Over the past 50 years, investment into string instruments is claimed to have returned an average of 8-15% annually.
Investors in art should be prepared to ride out the vicissitudes of fashion as well as economics, and the minimum holding period should be at least 3 to 10 years.
For private investors the spread between buy & sell price can be as high as 30% per transaction, making it extremely difficult to generate net returns in the short to medium term - for institutional investors this can be reduced to 5% or less.
Many art funds have failed to assemble and maintain a team of good and independent experts. One fund claims that, “There are 50 sought after experts, of which we have 8. It is rather difficult to get more than a few of them to work together.” Adequate critical mass is, for want of a better word, critical. According to one leading art fund manager, the art market is not going through a bubble. Although he states that, “some of the top 200 artists have peaked ... there are thousands of artists out there.” Gerhard Richter, Sigmar Polke and Georg Baselitz are all popular at the moment at a good price.
There is an element of self-fulfilling investment due to the relatively small size of the art market - with an estimated amount of USD30bn invested in art, institutional investors making allocations of USD1.5bn have the capacity to directly influence the market. The market for fine instruments is similar - presently valued at approximately USD22 billion, but, surprisingly perhaps, growing as instruments made by newer makers have become more prominent.
Art critiques can affect prices to some extent - therefore it’s vital to be in tune with the more influential museum curators and art dealers. The market is certainly open to anyone with an interest in diversifying their portfolio. All of which is very interesting but hasn’t yet appeared on the MBMG ‘buy’ radar.

The above data and research was compiled from sources believed to be reliable. However, neither MBMG International Ltd nor its officers can accept any liability for any errors or omissions in the above article nor bear any responsibility for any losses achieved as a result of any actions taken or not taken as a consequence of reading the above article. For more information please contact Graham Macdonald on [email protected]@mbmg-international.com

Snap Shots: by Harry Flashman

Break the portrait rules

This week it is back to people photography - the kind of snaps that most people take most of the time. There is really no secret in taking good portraits and this column has been over the “rules” many times. Here we go again, try to ensure that your lighting is coming from above and slightly off to the side, use a long lens (around 135 mm is ideal) and look out for distracting backgrounds (see all my previous columns on backgrounds). If you can, use a wide f stop (around f 4 is good) and get the subject to turn his or her head slightly, while you move around them, snapping away as the facial expression changes. You will get a good shot doing just that. But it will be a ‘good’ shot, not a ‘brilliant’ shot.
Here’s how. Sometimes you can get a brilliant shot, just by breaking the “rules”. Take a look at this week’s photographs. Portraits with plenty of punch, plenty of personality and a sense of immediacy. Long lens? No! Lighting off to the side and from above? No! Attention to the background? No! Yet these are good portraits and all the rules have been broken. So what or who do you believe?
Well, the first thing is to look again at the photographs. These shots get their immediacy from the activity in the shot. One man is half way through a large baguette, and has obviously been interrupted during eating. In fact, in mid munch. The second shot has violinist looking directly at the photographer, while obviously in the middle of a number. Neither of these being great “portraits” but both have that immediacy and action, making the shot come alive.
Now you could get these shots with the long lens, but by using one, you would stop the interaction between the subject and the photographer, being so far away while you take the shot. By using a wide angle lens, in this case a 24 mm, the subject was surprised by the photographer with the closeness. The subjects could not escape. They were caught by the photographer, like rabbits in front of the headlights of a car. It is not stretching your credulity to say that both photographs show that startled look of, “Where did you just bob up from?”
Now the lighting. While the “ideal” is the light coming from above at 45 degrees and slightly from the side, both these shots were taken with a flash mounted on the camera. Nothing fancy in any way. To have tried to set up the “ideal” lighting would have meant that the subject became a knowing part of the photograph. Immediacy? None! Surprise? Gone!
The moral of all this is simple. If you want “dynamic action” portraits, break all the rules of classical portraiture. You are really now in the realms of photo-journalism. This is the walk up close, “in-your-face”, paparazzi style of photography. You may, of course, get an earful of abuse from some subjects, but you have to be brave and brazen it all out. After all, look at the shot you may get.
Please note, however, that there is one rule that was not broken - and that was to make the subject the “hero” and the dominant part of the photograph. The subjects in these photographs fill the frame, and with the wide angle lens that did mean walking in close. Real close! Try getting in close this weekend. With the camera!

Modern Medicine: by Dr. Iain Corness, Consultant

A bloody pain in the bottom

Do you have rectal pain and bleeding? That’s what I meant when I wrote “a bloody pain in the bottom”. Embarrassing, but usually a minor problem, known as “piles”.
Piles are one of the most common ailments around. Embarrassing and very often a pain in the bottom, to use the very apt phrase! The medical term for piles is haemorrhoids (hemorrhoids if you come from the left hand side of the Atlantic), which shows why we don’t commonly use that name - too long and too hard to spell! I have often said that the reason that the medical course is six years is that it takes five years to learn how to spell the long words, but then, I’m joking of course.
So just what are piles and do you get them from sitting on wet grass, as the old wives will tell you? Let’s deal with the grass first. You do not get piles from sitting on anything, be it grass, newly mown or otherwise. End of the grass story. Piles are simply ‘varicose veins’ of the anus. You see, around the edge of the anus there is a very rich plexus of arteries and veins and it is possible for the veins to become distended and eventually form a grape-like structure that can even protrude from the anus itself. A classical “pile”.
The biggest problem with haemorrhoids is acute bleeding. Embarrassing as mentioned before, but can actually be such as to run you out of iron and you end up anaemic. Other symptoms include local soiling, discomfort and prolapse. You can also get a thrombosis in one of these protruding piles that can be very painful indeed. Ask anyone who has ever had one (or two).
There are lots of theories as to why we get haemorrhoids. Many women feel that they are the result of pregnancy or straining during childbirth, but since men get them as well that would appear to shoot that theory down in flames. Both sexes can get piles. A lack of dietary fiber has also been given the nod as a cause, but personally I am not convinced, as many people with great fiber diets still get piles. Constipation and straining at toilet does appear to have a bearing (bearing down?), but I honestly feel that the real reason relates very simply to our stage of development in the history of mankind.
My theory (Darwinian, I admit) is as follows - we used to walk on all fours, like all the other quadrupeds. Look at our first cousins, the monkeys, and they are still wandering around with knuckles in the dirt (and I have met some people that still do this), but many moons ago after seeing our reflections, we decided we looked better standing on our hind legs, so we learned to walk erect. This was fine, other than the fact that the valves in the veins in our legs and ano-rectal region were not up to the additional pressure the column of blood was exerting from the heart, now a meter or so higher than the valves. Straight out hydrodynamics.
Fortunately piles are relatively easy to fix, and the common rubber-banding technique will be successful for most. The only real danger in this condition is in ignoring the bleeding, thinking “It’s only piles.” As mentioned before, this bleeding can lead to anaemia, but the biggest problem can be the fact that rectal bleeding might just be a symptom of something more sinister, such as cancer, and not haemorrhoids, and it is possible to have both complaints at the same time.
The answer is to never ignore bleeding (from any cause) and get your doctor to check. It may be embarrassing - but it could be life saving.

Learn to Live to Learn: with Andrew Watson

The need for good practice

The need for good practice, I would argue, is equally applicable to any kind of organisation. The first rule of managing any organisation, as Drucker (1955) acknowledges, is to make a profit. However, I would argue that in education, defining the terms of ‘profit’, i.e., “in what forms does our profit come and what do we do with it?”, illustrates the inherent differences between factory and school. Call it ‘the human factor’ if you will, which in education, necessitates examining Drucker’s mantra, “Management must always, in every decision and action, put economic performance first,” in a different light. Acknowledging both the reality and subtleties of these issues is, I submit, a necessary condition for leadership of international schools in the twenty first century. What is required is a kind of new, post-modern ‘enlightenment’, perfectly consistent with political, social, economic but most of all economic, global reality.
The views of Tsolidis (2002) are thus reminiscent of ‘pre-enlightenment’ thinking where ‘business’ and ‘education’ are viewed as ‘incompatible’ on principles which are rarely articulated or examined in depth. In the sometimes narrow and parochial and often highly politicised confines of education, my perception has been that international education, whilst more ready and more free to consider ‘different ways of doing things’ has nonetheless lagged behind other kinds of international organisations in embracing evolutionary change. In many ways, it appears that the world of international education remains an ill-defined yet essentially conservative bastion, which whilst a shame, is nonetheless perhaps understandable. It is after all, a relatively new and brave world.
On the other hand, why on earth shouldn’t education change its paradigm? After all, as Wragg (1997) pointed out, education must incorporate a vision of the future. In terms of curriculum delivery, I would ask of a school, “How have you married modern technology to your curriculum delivery?” I’d ask, “Where and how do you acknowledge film, television and journalism as access points for teaching and learning?” And I’d ask, “Show me where and how you demonstrate your shared understanding of what it means to be an international school in today’s world.” Big questions, perhaps, but I would argue, increasingly necessary ones.
In many respects, in western industrialized countries in particular, it seems that schooling has remained fairly intact over the last century (Betts, 2001). Yet as the great Stephen Codrington of Li Po Chun United World College (2004) points out, “Learning environments, like life itself, are complex, non-linear and open-ended.” If schools don’t evolve, they will become extinct. But I would go further and suggest that pioneers (as many international schools effectively are) are in the position to design, engineer and facilitate real and dramatic change. They have nothing to fear, but fear itself.
My perspective that education is the last great hope for ‘civilisation’ is tempered by acknowledgement of the complex world that we have built up around us and the role that ‘education’ has played in creating an environment in which our children are sentenced to twenty years or more in schools, just so that they can learn how to survive in it. The human incubation period is getting longer, not shorter. Ours is an environment to which the human race has steadfastly refused to adapt; instead we have adapted our environment to suit ourselves (Jamie Uys, 1980). We have to run just to keep still. The job of leading an international school is something that requires such a rare combination of competences and characteristics, temperament and skill, experiences and education, that often, implementing something as idealistic as the IBO Mission statement has seemed a hopeless cause. The IBO Mission statement is a statement of great vision, but as (Collins, 2001) points out, “Great vision without great people is irrelevant”. At the epicentre of my experience of international schools has stood (or sat) the leader; sublime or ridiculous, they have been pivotal figures.
Leadership is a delicate balance between promoting initiative and empowerment on one hand whilst channelling energy in the same direction and maintaining a common focus, on the other. The variables involved in this equation are considerable; the quality and orientation of teaching staff are two of many critical components in the successful implementation of the mission statement. The core business of a school will always be teaching and learning and the delivery of the curriculum in the classroom is the ‘point of contact’ between mission and student; teachers the transmitters of what we might hope, is their passion.
So what kind of teacher does it take to convey the essence of a mission statement such as the IBO’s, which is an admittedly difficult piece of text to deal with? Gone are the days where you want submissive teachers - teaching, like writing (Bertrand Russell), should be an essentially subversive activity. The whole path towards a ‘better world’ seems to require that schools move from what Collins calls ‘good to great’ which means that there’s no longer any place for what he calls “Plastic people,” who have been trained (or who have learned) to quietly submit to the dictates of a domineering, or bullying CEO.
In recognising the elevated ambitions of the IBO mission statement, it is essential to consider whether its targets are achievable in any coherent, measurable way. Acknowledging my own left/liberal bias, I wonder, “Are their laudable objectives being achieved?” For as Jenkins (1998) points out, perhaps understating the problem, “There remain holes through which the student may fall”.
The demands and requests made by the IB diploma in particular, require a redefinition of self and place in the world. To many students, parents and teachers, it is a revolutionary approach to shaping students’ knowledge, attitudes, values, and action, for which some are not ready and many are unprepared. In this sense, the IB programmes can be seen as a dangerous experiment. The diploma is a gruelling, unforgiving journey and casualties of its academic demands litter the paths which join internationals schools. Too often, I have witnessed schools only too willing to take a student in for their fees, but less willing to provide what the fee-payer believes that he or she is paying them for. It’s all very well taking on a ‘needy’ student, but it’s not alright to do nothing for them on the grounds that it might interfere with someone’s leisure schedule. This regrettable reality of ‘no-man’s land’ also marks the biting battle ground between idealism and pragmatism.
Next week: Altruism, Nationalism and Globalism