Top 5 Art Investment Due Diligence Considerations

Due Diligence Best Practices

Luke Sparkes
26 Dec 2019

The stability of art as a sound investment in times of global financial uncertainty coupled with its consistently good performance as a long-term investment has ensured a place for art in many investment profiles. Now more than ever, art is becoming an accessible investment opportunity, with the rise of the Gicleé making it easier to make initial purchases. However, for all investors, those with wide collections and those new to the field, it is essential that due diligence is conducted to limit the risk of forgeries and ensure that the investment you wish to make is a wise one. Here we present our checklist of Top 5 aspects of due diligence that should be considered by investors before taking the plunge.


 1. Reference the Catalogue Raisonné  

This aspect of due diligence is a relatively easy and essential first step when making an art investment. A catalogue raisonné is a comprehensive, annotated listing of all the accepted artworks by an artist either in a particular medium or all media. The works are described in such a way that they may be reliably identified by third parties and provide a veritable bible of reference when considering the work of a master artist. Producing a raisonné can take many years or even decades, so it is entirely possible that the artist you are considering investing in may not have one as yet. Some artists who have collections in various mediums have multiple catalogue raisonné’s that reference different works. For artists that do have a catalogue raisonné, the information that can be obtained from searching this is vast and can help validate a purchase. Work listed will have a catalogue reference number and practical information related to size, date of the work and the medium. Crucially, a catalogue raisonné often includes information in relation to the history of the work, including exhibition history, provenance and bibliographic information surrounding the piece, such as essays on the artist and critical assessments. This information is invaluable to assist collectors in initially identifying works and helps protect the art market from the many forgeries that permeate the field.

This simple aspect of due diligence should not be neglected.

 

2. Obtain a meaningful Certificate of Authenticity

A Certificate of Authenticity is a reassuring sign for any buyer; however, it is important that you obtain the right one. A genuine certificate should reference information such as its full title, who created it, when, in what medium and with what technique, edition number (if applicable – mostly used for limited edition prints, for example), its dimensions, and a signature of the person citing the legitimacy of the work. However, even with all this information there is still no guarantee that the certificate is genuine, so do your research to check its credentials. Is the person claiming authenticity from the artist’s estate or an appointed expert in the field? If so, one should be pretty reassured. Seek to verify the credentials of the expert signing off the certificate- for example, if they claim to have advised museums or galleries, get this substantiated to ensure they really are the expert the claim to be. If the certificate stacks up, having one is good because it greatly increases the artwork’s value on the market and instantly establishes credibility when you come to sell.

3. Find previous insurance documentation

If the artwork you are considering has been previously insured with the current owner, the chances are your purchase is going to be more straightforward right away. If insurance is registered to the current owner, the risk of surprises over ownership are eliminated at the point of sale. The very fact that insurance has been obtained is reassuring as it is likely that the insurance company in question would have undertaken some due diligence measures themselves. Previous insurance details help transform the piece into an object of worth, and level of insurance that has been undertaken hints at its current value which may help the collector determine if the current purchase price is reasonable.

4. Provenance

Perhaps the most important aspect of due diligence is tracing the provenance of the piece you intend to invest in. Provenance is the tracking of the ownership of the artwork over time, making it clear who owned it and when. The best way to track provenance is to start with the current owner and go back in time owner by owner. In a perfect world a piece of artwork has lots of history with a seamless record dating back to the final brushstroke of the artist. However, the reality is often far from the fantasy with records being lost over time or never kept in the first place and deals sometimes conducted with an untraceable handshake or gentleman’s agreement. Even major world events like the confiscation of modernist work falling foul of Hitler and the advent Nazi plunder in World War 2 can account for gaps in history. Like many things, in the case of provenance knowledge is power and the more that is known about the piece, the better.

5. Forensic Analysis

The art world relies on many aspects of forensic analysis to provide evidence of authenticity and these methods are growing in sophistication. Investigators can perform a stylistic evaluation on the work, carrying out tests which determine the age of the materials used. Techniques such as stereo microscopy allows for 3D visuals which enables investigators to decide whether the methods used in this work, such as the layering of paint are in keeping with other works by the artist. Microscopes are also excellent tools for observing craquelure, the entirely unique cracks that appear in a painting over time. Other techniques such as mass spectrometry , x-rays, infrared reflectography and carbon dating are also used to analyse a piece of art. However, it is worth noting that although these techniques can prove if a piece is fake, forensic analysis is unable to 100% confirm authenticity of work. Regardless of how sophisticated the science is, there is always that small chance that the piece in question may be that of a forger one step ahead of current detection methods.

Thorough and careful due diligence is essential when purchasing art, so buy carefully, following this checklist and taking advise from experts in the field. Alternatively, leave all the due diligence to Smith & Partner, where we handle the investment process from start to finish, including guidance and storage.

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