Billionaire’s Secrets on How to Make a Bundle in Art (Source: Bloomberg) 

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Returns can be eye-popping, but collectors must avoid the pitfalls of forgeries, fakes and rapidly changing tastes.By Frederik BalfourMay 7, 2018, Andy Warhol once said: “Making money is art.” But what about making money from art? A boom in the global market has delivered some eye-popping returns in the past few years, drawing new collectors keen to invest in an asset class that offers cultural as well as financial appreciation. 

Irish horse breeder John Magnier will get at least $150 million for a painting of a nude by Amedeo Modigliani on May 14 in New York at Sotheby’s, thanks to a third-party guarantee. He paid $26.9 million for the work in 200For many investors, the market has grown too big to ignore. Last year global sales reached $63.7 billion, according to an Art Basel and UBS report. Art has delivered average annual returns of 8.9 percent since 2000, an index tracked by Artprice.com shows. But the market is opaque, unregulated and sometimes extremely illiquid. Gallery owners and auction houses charge commissions of 25 percent or more, sometimes negotiable, and art buyers must avoid the pitfalls of forgeries, fakes and rapidly changing tastes.“In the art market there are no rules, that’s why it is such a minefield and why it has such opportunities,” says Wendy Goldsmith, a London-based adviser in modern and contemporary art. “When I start with a new client, half my job is to say no, especially to people from finance who think because they can master one market they can master any market.” While some collectors have made fortunes, Goldsmith says the world is littered with warehouses of art that have depreciated as much as 90 percent. To help navigate these treacherous waters, we asked three of the world’s most successful art buyers for advice on starting a collection.

Uli and Rita Sigg

Uli Sigg, 72, has amassed probably the world’s most comprehensive collection of Chinese contemporary art, having bought more than 2,500 works since the late 1990s when he was the Swiss ambassador to China. When he started, China had only one commercial gallery and Sigg traversed the country visiting artists in their studios and buying up works from the likes of Ai Weiwei, Zhang Xiaogang and Zeng Fengzhi. Even the most expensive items cost him little more than $10,000 at the time. Today many of them sell for millions.