How to create a national art index?

Elīna Zuzāne

An interview with Riivo Anton, a partner in a consulting company called Innopolis Group.


Riivo Anton is an entrepreneur who describes himself as a friend of art. He is a partner in a consulting company called Innopolis Group, that he as a student started 12 years ago, but which today has developed into a successful business with three independent branches, focusing on financing and project management, investment management, and civil engineering. All of this sounds very serious and, to be honest, it would take a serious and determined someone to create an Estonian art index just out of a curiosity, which is exactly what Riivo Anton did. Although the index was created on the publicly available data exposing only the visible side of the Estonian art market, private transactions and deals undisclosed by galleries have evaded him… so far.

You don’t call yourself a collector but a friend of art, why so?

If a person was telling me something about art collectors, I would immediately assume them to be guys in their fifties or sixties. I think that’s the typical view of an art collector, but I’m the same age as you. So if I’m called a collector, it makes me feel old. (laughs) I’d rather be a friend of art, but I do have a collection. I have art pieces, to be precise, that have not been collected as a result of a very deep thought process. They are mostly just artworks that I like. But there is one small speciality–prints from the period of the late 1960s till the 1980s, which was the time when prints were very popular in Estonia. This was also when annual yearbooks of these Estonian prints were published. So now I’m trying to collect all of the pieces that have once been included in these yearbooks. Although, they are pieces that could be labelled as “modern art”, I think almost half of them could easily be considered contemporary in their essence. It’s a niche I’m concentrating on and for the last 2 or 3 years I have started buying contemporary art. I think it’s the right turn, but at the moment 2/3 of my collection is actually modern or classic art.

When did you start your collection?

I think it was around seven years ago. It was quite accidental. I didn’t know anything about art. My own connection to art was only though the art history lesson at high school. But then one day I accidentally saw an Estonian art piece on eBay. It was a print by an Estonian printmaker Eric Pehap that used to live in Canada. I bought it just as a test and it proved to be real. So then I contacted the person who sold it and asked him where had he gotten it. As it turns out he [the seller] actually had a collection of Eric Pehap himself, and he had acquired it from the artist’s children. So I in turn bought the whole collection from him. It was something like 80 prints. That’s how the collecting started. It’s strange. There was no particular reason, just a coincidence. Later on I started to gather more data about the prints and the Estonian art in general and that’s how it developed.

Could you tell me more about the art index that you recently developed for the Estonian art market?

At one point I started collecting art and because of my background in business I began to wonder, if this interest of mine had any investment value. I asked around various gallerists and other people, who were supposed to be experts within the Estonian art scene, but all of them just told me that it was a good investment and that’s it. They didn’t give me any numbers or proof so I became curious about it. Just to be clear this [investment] was not my primary motivation for collecting art, but I was just questioning it - whether it actually had an investment value and, if it did, what should be the right of return?Usually the right of return for art is calculated through an art index, which is based on transactions that mostly come from auction results. Today there are many art index services around the world, but there was none for Estonia. So as I couldn’t find any existing answer, I decided to create it myself.

I collected all of the Estonian auction data that was available from the year 1998 till 2011 and gathered a database that consisted of about 4400 transactions. Then, however, raised the problem of how to actually go about it? If all of the artworks are different, how can you measure their value? It was an econometrical question. Usually econometric model is built up from different characteristics of an art piece, such as its author, size, medium, whether it was signed or not, etc. You apply various scales for each of these characteristics and then you can construct an econometric model. This way you can actually make all of the pieces comparable to each other.

There is also another option where you would need to pick out all of the works in your database that are the same.You could calculate the rate of return just by comparing their prices in different periods of time, but in this database, however, only a few of the exact same art pieces existed. I thought that maybe it would be easier with prints, because prints are usually multiple copies of the same image. You would think that they are the same, but actually, of course, they are not. The value of each print depends on how it has been kept, who has owned it or even how it has been framed. I discovered that there were less then 100 of those multiple transactions and of course I couldn’t use this method.

Anyways, I had this database but I discovered that only a few of these transactions were of contemporary pieces - only 5% was contemporary. Most of the data  - about 2/3 of it - consisted of transactions that involved classic or modern art. That’s actually one of the problems with Estonian art market – we don’t have contemporary art auctions. I don’t know why that is. One reason could probably be that the classic collectors are not interested in collecting contemporary art. Or it might be that people think of contemporary artists as living artists, so they go directly to them and buy art directly from them, cutting out the gallery.

How do you acquire artworks?

I try to buy contemporary art from galleries or from auctions because otherwise the system wouldn’t work. Even if you would take it as an investment, you shouldn’t buy it actually from the artist because then there is no one to take care of the asset. The gallerists are actually the ones that make the value of the artist – they market him, they try to publish his works, they try to place them into good collections. Those are actually the elements that increase the price of an artist. If you buy a work of art just from a person, the investment is not well taken care of. That’s why I don’t like the idea of cutting out the middleman. The middleman is actually needed for both ends of the transaction.

Maybe the reason, why people are not buying contemporary art at auctions, is because only a few select works are represented there, whereas, if you go to the gallery or an artist’s studio, you get to choose art that suits you the most.

I agree with you. Twice a year a young artists’ auction is taking place in Tartu, the second largest city in Estonia. The prices there are actually really low. I think the average price of an art piece is maybe 100 euros. If somebody would be interested in starting their art collection, it would be a good place to start. Of course you might not know what you are buying, in a sense that you don’t know if this particular parson will be an artist in the future, but I’d say at least half of the pieces given to the auctions are actually from the artists that have some potential of being recognised in the future.

During my research I also discovered that the average starting price of an art piece was actually around 400 euros. This I think gives quite a good idea that art is accessible to everyone. Although the average price is 400 euros, I’m sure you could also find something for 100 euros or 200 euros. It is not an exclusive. If you skipped a couple of drinks, you would already have access to some pieces of art. Money is not an issue.

I can also confidently say, that the art index follows the path of the economy; it follows the same trends. You can’t say “oh, if there are bad times in the economy, I will sell stock, buy art and be protected against the economic fall.” You don’t have that, at least not in Estonia. The art index is even more correlated with the real estate market. I think it’s logical. A lot of people earn money with the real estate and then I would assume they buy some art.

But did this research give you the assurance that art is worth investing in?

Yes. Actually, the nominal rate of return is around 10% per year, but I couldn’t calculate it for the contemporary art because the number of works was too small. Anyway it’s just a calculation. If you look at the stock exchange index, you would know what the stock exchange is doing but you would know really little about any particular stocks that are there. It’s the same with art – you know the market but not the particular works. Of course you also have to look at the inflation rate and, taking it into consideration, you would earn 5% return. In short that’s what I recently did as research.

And this was part of your studies?

Yes, it was part of my Master’s thesis. I needed to complete my Masters thesis and I think it was a good way to do it because I didn’t know the answer to this question and it really kept me motivated. But doing those excels and doing the research was actually quite annoying in a sense that it’s a lot of data. I think I had something like 45’000 rows of data… I had a lot of lines and rows.

So what conclusion did you arrive at - should art be bought for an investment or pleasure?

I’d say you should really buy art for your own pleasure, but doing so you don’t have to worry of its investment value, because it exists. If you started just investing in it, I think you would be in trouble because art is hard to sell. The index just shows its theoretical value, but it really doesn’t tell you, if something that you have bought for 100 euros today, will in fact be 110 euros in a year’s time.

But surely there are artists whose works have continuously sold well?

You could say that the best right of return is actually with the well-known authors. The most traded classical artist was – Eduard Viiralt, a printmaker. His share in the total database was around 8% (204 prints). But the ten most traded artists made up 25% of the total number of works.

It is interesting that there have been many studies regarding this subject and most of them would actually tell you that the well-known authors and their expensive art works are not providing a better rate of return than the cheaper and less known ones. I don’t know what’s the reason for this [mismatch] in Estonia. It could probably be the methology – most of the studies are actually trying to figure out whether the expensive works have a better rate of return, but here we have the most traded authors. There probably is a correlation but it’s not just the same. The other thing is that Estonian market is very small and the time frame is quite short, so it could be just a coincidence or a mistake. Most of the studies are looking at a period of 100 years but here we only have 12 years.

Is this now a finished piece or are you going to add more data to it?

It’s a finished piece in a sense that the Master thesis is ready and I had a successful defence, but I’m now planning to have a scientific article that we will try to publish within the Journal of Cultural Economics, one of the leading publications for studies like this.I’m quite a practical guy, it is my supervisor and statisticians who are mainly behind this scientific publication. Still there are a lot of econometrical issues to be solved. I wouldn’t go into the details of it, because I don’t even understand them myself, but I know a lot of statistics who say that in order to have the real index, a statistically well developed index, I should go further and beyond.

What does that mean?

It means that I should test the model that I have in various statistical ways and I should collect more data. I now have the data for 2012, which could be added to the existing research. Another thing that could be taken into account is the data of museums – the transaction data regarding the works that museums have bought.I think this information could be trusted and it would also show the development of the market. If I could add say another 500 transactions, this would already statistically make quite a difference, especially for the contemporary art as the museums are now buying more of the contemporary art than the classics.

Has this art index been already published in Estonia?

No, at the moment it has not been published. There have been a couple of journalists who are writing something about it and I’ve done a number of presentations for the members of the ministry of cultural affairs, but it has not been widely recognised yet. My dream would actually be to publish this index semi-annually or once a year so that it became known. Say if someone was interested in arts, they would know that every December there will be a new report on how the market has developed. There must be other people who are wondering about the same questions that I did.

Wasn’t it your goal to have an art index for Latvian and Lithuanian art markets as well?

My idea was actually to develop an official art index for Estonia, Latvia and Lithuania so that we could see how the market has developed.One of the most important things for having such an index is that it actually shows people how the market is evolving, it gives the market more transparency and it might even have some marketing effect. When annually or semi-annually people saw, for example in Business Daily, that a new index value is published, they would think about it as “Well it’s art, but maybe it’s also an investment. Maybe I could buy something.” Maybe it’s also a way to support the whole sector.

Have you tried getting this data from the other countries of the Baltic Sates?

Yes. I think my colleagues in Latvia and Lithuania have been in contact with the ministries, but at the moment there has been a slow response. You can actually gather the data from webpages where they are published, but we would need the funding to support the whole process, because it actually takes quite a lot of time to make the database and to do the analysis. I think I put around 500 hours into it.I already have the model of how to do it, so the most expensive part of the project would be finding somebody to enter the data. It’s not an expert work, it’s actually quite a dull work, I would say, but somebody needs to do it.

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