The fine art of investment

Janice Healing takes a peek into the world of the wealthy to see how they spend their spare cash.

PEOPLE who have amassed great wealth are often in that envious position because they make sure their money works for them. Once they achieve a certain net asset value, they do not simply let their money sit in a bank and earn interest, they invest it wisely to make even more.

So where are they putting their spare cash?

Nedbank’s Clive van Horen says the appetite for risk among clients is high on the property side, with many involved in the buy-to-let market. They would, for example, buy a couple of R1-million apartments in a complex.

“The wealthy have generally become less risk-averse and are more willing to borrow against their assets to generate future wealth,” says Van Horen.

Confidence has returned to the equity market and wealthy individuals have become much more active in this space, he says.

“However, items such as yachts, art and jewellery are not very big in the lives of South Africa’s wealthy, in contrast with overseas where there are Swiss private banks with divisions dedicated to these special asset classes.”

One of the interesting avenues for the wealthy in the past couple of years is that of locking in the value they have accumulated in company shares, he says.

Absa Private Bank head Zarina Bassa says her clients are active in a range of asset acquisitions, for either personal tastes, or investment objectives, or both.

“This means they will individually own assets that are not publicly traded, ranging from hand-woven pure-wool carpets, to contemporary or classical art, to wine farms, to stamp collections. As to choice, it all depends on the individual tastes or requirements.

“For example, our Family Office, which takes care of our larger clients, undertakes the management of farms for clients who are busy with other business interests and unable to apply their time to managing what, for them, is often a significant asset in their global portfolio,” says Bassa.

In addition, the bank’s private bankers accompany clients to visit the managers and custodians of their international assets, including property in London, for example.

The bank has recently pioneered a financing structure that enables clients to finance an exotic sports car for a fraction of what one would ordinarily expect.

PSG Konsult portfolio manager Gerhard Naude says that, with their return on equity, the super-rich are in a position to acquire high-priced items such as game farms, speedboats on the Vaal Dam, a beach house in Plettenberg Bay and luxury items such as sports cars, jewellery and sought-after art.

“But it is important to take note that these items form part of their interests and not their investments,” says Naude.

Mary-Jane Darroll of the Everard Read Gallery in Johannesburg says that investment has become a big buzzword in the art environment over the past five years.

“People have heard that it is possible to make good returns if you play your cards right. For example, Irma Stern pieces cost as little as £15 to £30 about 70 years ago and are now worth as much as R2-million, but with art it is always easy in retrospect,” say Darroll.

She says that the country’s top private collectors make up a small community who are able and willing to pay top dollar.

“For them it is not a problem to spend R120000 to add an item to their collection. Once the art bug bites, you feel an incessant desire to build up your collection, but serious collectors know they must be patient and wait for a quality piece,” says Darroll.

When investing in art, Darroll says, it is imperative to get professional advice, just as one would in the stock market, and buy only from a reputable establishment, which ensures the provenance — the source and the history of the piece.

She says that an art work should not only appeal to the buyer from an economic perspective, but also grab him or her on an aesthetic and emotional level.

“In the past five years there has been a lot of talk about installation art and conceptual art.

“These pieces are very difficult to display — yet, in a sense, art is not about practicality, it is not a logical domain that one can analyse and pin down.”

The most expensive item sold by the gallery was a R2-million life-size Dylan Lewis sculpture of a black rhino.

Article by: Janice Healing - www.sundaytimes.co.za