Art Investment from the Perspective of Cultural Economics
Source：Global DBA (Asia Track)Date：2019-07-08
Mr.Kenneth LAI, one participant of emlyon Gloabl DBA 2017 Intake, currently serves as Executive President of Anfield Investment Group Co.,Ltd., who has long been engaged in research and practice in the field of art investment. How to look at art investment in the perspective of cultural economics has become one of the hot spots today. Therefore, Shanghai Airlines has an exclusive interview with Mr. LAI.
Mr. Kenneth LAI
Executive President of Anfield Investment Group Co.,Ltd.,
emlyon Global DBA
What is the relationship between art investment and other investments in the financial markets? Was art investment affected by the financial crisis? When will art investment be affected by the volatility in the financial markets? How to price artworks? ... These questions are some of the frequent concerns of Mr. LAI, who is currently studying in emlyon Global DBA Program. He loves oil painting and sculpture and also makes some art investments, especially those presenting portraits. For him, the pleasure and affection are the primary payoff of his investments in art. To this end, he also suggested that individual collectors shall take “preference” as priority when choosing artworks, so that in addition to value realization, they can also enjoy the beauty of art.
For merely investment-oriented buyers, Mr. LAI suggested that they may consider the behaviors of art investment in the perspective of wealth management and deem art investment as part of wealth management. When picking up artworks, they may take “the preference of others” as priority (in order to facilitate circulation), entrust professional institutions and deal with risk management. Having worked in European financial institutions and Chinese investment banks, Mr. LAI is reluctant to use “art investment” to refer to the entire domain of art finance. In his view, finance shall serve the entire art industry, including authors, galleries, brokers, museums, auction houses, collectors and investors. To achieve positive interaction with the financial industry, the art world also needs to engage in regulated development.
Regulated development of the art industry depends on solving the trust issues in all links of the value chain
If underregulated, when capital flows into the industry, it will amplify the "negative" side and bring devastating effects to the development of the industry. On the contrary, if the industry is properly regulated, when capital enters, it can better guide capital flows and facilitate its benign growth.
For the current art industry, Mr. LAI believes that there are two major pain points that affect capital inflow. First of all, the industry chain is too fragmented. And second, the problem of counterfeiting occurs from time to time, hurting the entire industry. The regulated development of the art industry depends on solving the trust issues in all links of the value chain.
Take the art of painting as an example. After an artist finishes a good painting, he may wish to register the work first, so that the authenticity of the painting is traceable in the future. The artist association shall restrict the artists’ personal conducts and implement the access system. The brokers must first pass one of the recognized examinations before practice. The broker association shall also follow ethical conducts accordingly. As a hub connecting the industry chain, a gallery shall make warranties to both buyers and sellers and have registered capital and legal person, just like an incorporated entity.
Mr.LAI believes that there are two major pain points that affect capital inflow. First of all, the industry chain is too fragmented. And second, the problem of counterfeiting occurs from time to time, hurting the entire industry. Every region has its rich culture. Among different regional cultures, there are not necessarily conflicts and opposites. "Art is the expression of emotions, and emotions are the common language of human beings." The ingenious use of cultural influence, including art, can make the business deeper and broader.
The details of relevant profiles, the improvement of laws and regulations related to art investment, the application of new technologies to anti-counterfeiting, identity authentication and many more. From the perspective of a financial practitioner, Mr. Kenneth gave his advices on regulation of the art industry. He admitted that only through transparency and a healthy market, will financial institutions dare to provide multi-level and multi-dimensional financial services to the art industry, just like to other industries, instead of merely lending money to investors or institutions to buy artworks and engage in auctions.
In his view, art is not only a carrier of history and culture, but also conveys the aesthetics of real life. It also involves the management of alternative assets. Therefore, when doing related research, he puts his perspective on the level of cultural economics, while art investment is just an entry point into the field of cultural economics.
The cultural industry has its own return, which takes more time to realize than other industries.
Expanding his own experience in research and collection of art investment, Mr. LAI feels that the risks and rewards of the cultural industry are different from those of other industries. Because of the differences, the market often thinks that the art industry is risky and elusive. Personally, he believes that the cultural industry has its own return, which takes more time to realize than other industries.
To drive the development of the art industry, all players and stakeholders inside and outside the industry need to grow together. At the industry level, collectors/investors need to measure the risks and rewards (both psychological and financial returns) in art investments. The art industry needs to engage in more publicity, promotion and communications, such as the education of aesthetics and the training on market fundamentals. The art finance business needs new pricing methods for artworks as alternative assets, creates a risk control model that fits this particular market and provides wealth management education. Beyond the industry, academics, industry and the public shall also keep in touch. For example, museums not only collect artworks, but also educate the public and show cultures. Enterprises may organize exhibitions for local students to show their talents. Moreover, the government can also make the city a more interesting place and infiltrate culture and history into different corners of the city, so that different buildings reflect different cultures and styles.
"The art in life and the life of art" is the philosophy held by Kenneth. In his view, culture shall be displayed in life. Cultural interaction will improve the harmony of the society through soft influence.
Business continues, so does communication
Every region has its rich culture. Among different regional cultures, there are not necessarily conflicts and opposites. "Art is the expression of emotions, and emotions are the common language of human beings." The ingenious use of cultural influence, including art, can make the business deeper and broader.
For example, when a company participates in the construction of the “Belt and Road” initiative, it shall not exclusively focus on business and be ready to leave when the business is done, leaving the impression of bluntness and indifference. We can send artworks to local partners, not limited to masterpieces of famous artists. It expresses appreciation and helps to strengthen communication and exchange. We can also support some new artists to travel to the countries along the “Belt and Road” for collection and sketches every year, which not only enhances the connection with the local countries, but also helps these artists to open their horizons, broaden their career choices and cultivate cross-disciplinary talents.
Business continues, so does communication. The “Belt and Road” initiative has established a good channel for cultural presentation and display. The entire cultural industry, including the art industry, can make full use of this channel and make a difference.
Reprinted with permission of Shanghai Airlines