Camera masterpieces put
sector in focus
FT Weekend Money
July 2011
Record auction prices for photographs are leading an increasing number of collectors and art funds to invest in this booming sector.
On Valentine's Day, Sotheby's sold Edward Steichen's "The Pond - Moonlight" for close to $2.93m (£1.5m), nearly three times its estimate and a world record for a photograph.
It is only six months ago that a photograph broke through the $1m barrier with the sale by Christie's of Richard Prince's "Untitled (Cowboy)", a photograph of the advertising world's view of an American icon. The auction price obtained for the Prince photograph is seen as a watershed moment for the nascent art sector, according to Charles Dupplin, chairman of art and private clients at insurance underwriter Hiscox. As well as insuring art, Hiscox has its own art collection.
Dupplin says: "Contemporary photography is now increasingly popular for limited edition prints of very high quality."
However, a shortage of art funds means that most of the money that is being invested in photographs is going to dealers rather than into funds. In an often secretive area where informal investment clubs are more common than regulated vehicles, the first photography-specific fund was formed by ex-Commerzbank hedge fund manager Mehmet Dalman.
WMG, Dalman's alternative investment management firm, has the works of 20 to 25 artists in its photographic portfolio. These include pictures of Marilyn Monroe by Magnum photographer Eve Arnold and works by the Russian constructivist Aleksandr Rodchenko. WMG is now buying up Nasa's iconic shots of space.
Dalman's investors were by invitation only, he says, and were often his peers in the lucrative hedge fund community in London. He says: "The new hedge fund money is interested in contemporary art, and photography is a good way of expressing this."
Dalman has hired veteran photography dealer Zelda Cheatle to manage his photography portfolio. She says: "This is a chance to put my favourite 20th and 21st century people together in one collection but, as it is a fund, with the aim of longevity and for accrual. Photography is seen as a new art form but one that is heading towards its 200th birthday."
More generalist art funds are also starting to dip their toes in the photography market. Philip Hoffman, an exdeputy managing director of Christie's and who is now chief executive of Fine Art Management Services, says a small proportion of its first fund is now in contemporary photography.
One of his investment managers, Ian Dunlop, launched a contemporary photography prize when he was head of Citibank's art advisory service in the mid-1990s. Hoffman is considering launching a second fund that might concentrate more on photography.
Hoffman says wealthy investors who in the past might have built up a collection of paintings are now happy to put their money into photographs.
"One house I recently visited had only black and white photos in it," he says. "It was furnished and painted just in black and white and even the couple were dressed like that."
But he warns that the substantial price rises of the past two or three years might just reflect short-term upside rather than longer-term sustainable growth, which is what the sector will need to show to encourage funds into the market. Hoffman adds: "We also invest in Old Masters and have seen as big gains there as in contemporary art."
The UK-based Fine Art fund has seen an average annual return of 58 per cent on assets sold since launching in early 2004 but aims for an annualised 10 to 15 per cent return over 10 years. Minimum investment in the fund is $250,000 although investing through a bank can reduce this. The initial charge is 1 per cent with an annual management charge of 2 per cent plus a 20 per cent performance fee once returns have reached a 6 per cent "hurdle".
Among other art advisory firms willing to help investors tap into the photography market is London-based Seymour Management. Spencer Ewen, managing director, says investors would be expected to have a minimum of £50,000 available to spend.
The easiest way to begin collecting is to attend one of the art world's trade fairs, says the US-based trade body, the Association of International Photography Art Dealers. Its recent New York show drew about 90 dealers from around the world, according to Kathleen Ewing, its executive director. Some of these dealers are coming to the UK for Photo-London, a fair which opened on Thursday and runs until Sunday at the Royal Academy of Arts' Burlington Gardens exhibition space. First staged in 2004, the fair attracted more than 18,000 people in 2005, generating sales in excess of €3.2m.