Investments in art in emerging markets: issuing RWAs, authenticity verification, deal conclusion

In the context of declining activity in the stock and bond markets (Russia, Turkey, some countries in Eastern Europe, some emerging countries) investors have begun to look for alternative directions for investments. Such directions include cryptocurrencies, art, gold and precious metals, wines, and foreign real estate. The share of art in alternative investment portfolios has noticeably increased.

The company ArtCollecting surveyed more than 200 investors with capital exceeding 1 billion rubles. The results of the study showed that their investments in art constitute no less than 15% of the total volume of alternative investments. It is expected that this figure will increase by the end of 2025. This raises questions about which segments of art are worth investing in and how to properly organize the process of buying and selling art objects.

Investors show interest in several directions in art: Russian art from the late 19th and early 20th centuries, works of contemporary art stars such as Banksy, Refik Anadol, or Damien Hirst, editioned works of foreign stars of the 20th century, for example, Andy Warhol and Roy Lichtenstein, fashion photography by Helmut Newton and Richard Avedon. Sometimes they are interested in Soviet unofficial art.

Art of the late 19th – early 20th century

Risks: buying forgeries

Prospects: quick sales at auctions and on online platforms

Authentication Check. The first question that needs to be addressed when investing in art from the late 19th to early 20th centuries concerns authentication, i.e., the selection of genuine works, since the art market is rife with forgeries. To confirm the authenticity of works from this period, technical and technological expertise is used, capable of establishing the real age of the artifact. The next step is the analysis of archival data, which can provide information about the life of the artist and his work during a certain period. Information about works presented at exhibitions during the artist’s lifetime is usually recorded in catalogs stored in libraries. For works not included in such catalogs, a deeper search for proof of authorship is required. In addition to art historical and technical-technological expertise, work is conducted to verify provenance—the origin of the artwork and the history of its ownership changes.

Transaction processing. If you are investing in art, you should approach the process of formalizing the purchase and sale transaction with the same meticulousness as when buying real estate. The contract should be accompanied by an expert opinion and an art piece passport, containing a photograph, specifications, references to the expert opinion, and the expert’s main conclusions. The passport should bear the signatures of the seller and the buyer, and in some cases, the expert who conducts an additional check during the transaction to ensure the object of sale matches the expert opinion and to exclude the possibility of purchasing a copy or a forgery.

Works of contemporary art stars

Risks: forgeries, decreased demand, embargo

Prospects: quick sale to art dealers working with stars, or to private collectors on online platforms

When investing in works by stars, it is necessary to consider that the embargo imposed by developed countries prohibits the trade of luxury items, including works of art, with Russian citizens and their export to Russia. However, the acquisition of works is possible through foreign galleries that do not adhere to the embargo. An alternative option is to work with art dealers who have dual citizenship or foreign art dealers, for example, from the United Arab Emirates, Uzbekistan, Tajikistan, Kazakhstan, or other countries from which the export of art is possible. Investors often organize such deals through trusted companies or legal entities abroad: works purchased abroad are accompanied by their own supply department. This allows minimizing the risks of losing ownership rights during complex dealer operations.

Classics of fashion photography

Risks: buying a reproduction instead of a copy signed by the author

Prospects: quickly sell through galleries

Before investing in works by world-famous artists such as Helmut Newton or Richard Avedon, it is important to study materials on the technique of creating photographs of the 20th century. There are precise data on print runs, historical information on copies signed by the author, as well as information on the provenance of the works. Foreign galleries and auction houses actively use blockchain technology, issuing RWAs with legal data. Access to information about the origin of the work is open and can be verified. In the absence of provenance, an expert examination is necessary.

Unofficial art of the Soviet Union

Risks: buying counterfeits, being denied when exporting from Russia (if the age of the artifact is more than 50 years, but this risk is unlikely)

Prospects: quick sales at auctions in Russia, where there is stable demand

Authorship Verification. The main investment risk when purchasing unofficial art is forgeries. The attention of forgers is particularly drawn to this market. They have realized that copying or imitating the works of Shishkin or Aivazovsky is futile, as experts are already well familiar with all methods of forgery, and modern technologies allow determining the real age of the works.

It’s a different story with art from the mid to late 20th century. Technical and technological expertise is useless when it comes to the later works of “unofficial” artists who were active in the 90s and early 2000s. These are the works that are constantly being forged. The key role is not played by technical and technological expertise, but by the study of archives, exhibition catalogs, interviews with artists in the media, and recordings of television programs. Personally, when I conducted an examination, I watched all available videos with Vladimir Nemukhin on YouTube and noted fragments with works in the background.

Interaction with the families of artists, their children, and grandchildren, who may have access to private information and can help confirm or refute the authenticity of a work, is also important. Confirmation may be found in family archives, on unpublished photographs.

Seller Verification. Special attention should be paid to the legality of the artwork’s origin and to who is selling it. Artists had friends, and those friends had children who decided to sell off the inheritance as soon as possible. Sometimes at auctions, one can stumble upon nonconformist works at ridiculously low prices. But before buying, it’s necessary to understand what’s going on. Is the artwork cheap because someone is squandering the inheritance? Or is there another reason? For example, unconfirmed authenticity. If the sale is urgent, it’s important to understand whether the seller realizes the real value and possible consequences of their actions. As is the case with real estate.