Investing in collectibles

John Azzopardi Vella interviews Ivan Vassallo of Thomas Vassallo Antiques

Your family has had a Valletta Merchants Street address trading in antiques since 1915. You are the present leader of the Thomas Vassallo fine art trading tradition. Do you see a future in investment in collectibles in this country?

Investment in collectibles has certainly had a great past in Malta. Its immediate future promises to be even greater as there has been a severe fall in the world stock exchange market which can only recover after many years. Clients come to my showroom and they are full of stories about the monies they have been losing on their monetary investments.

What is your advice to these disappointed people?

My advice is that they should watch their Bloomberg financial screen more carefully and scrutinise the arts page of quality financial magazines. It is an open secret that the biggest investors in collectibles are rich brokers and investment bankers because it is they who have knowledge of dangers deriving from the unstable nature of the stock exchange. The Bloomberg financial screen caters for the lucrative side of the money market, by interviewing artists and antiques dealers on Sunday morning. It certainly tries to stimulate trade in collectibles. Detailed news about fine art auction sales appear in the leading financial magazines and dealers who buy at auctions are always mentioned by name along with the prices they pay.

Thomas Vassallo Antiques is a fine art dealing and restoration house rather than an auction house. How do you describe the function of the fine art dealer in Malta?

The function of the fine art dealer is to put a bottom to the market. Everybody knows that dealers or their representatives attend all important auctions in Malta or abroad. They certainly know how to spot a bargain. If a painting or a piece of furniture is not bid up beyond its reasonable price, a dealer is certain to acquire it.

He may sell it later in his establishment at a reasonable profit. So a dealer performs the useful function of preventing any catastrophic fall in the fine art market. This makes for stability in prices preventing the violent oscillations to be found on stock exchanges. This is not to say however that prices in the fine art market never exhibit severe ups and downs, but they are very infrequent.

The last big movements in the price of antique silver took place over 20 years ago when American oilman Bunker Hunt, who discovered Libya's oil, tried to corner the entire world silver market. I know of a Maltese collector who bought massive pieces of antique silver in that boom - and he is still nursing his losses.

At that time silver was $50 an ounce; during the last few years it has never gone higher than $5 an ounce. People were selling their precious antique silver for scrap, as the bullion price was so high. It must be said that the Bunker Hunt silver cornering boom has never repeated itself, even in the depths of the present stock exchange collapse. It is to be noted however that gold has been the best performing currency during the past year.

It is the dealer's role in Malta to point out these facts to his clients. Perhaps the time will come when Government will regulate the position of dealers in Malta by issuing a licence which grades the efficiency with which that particular dealer can carry out his work.

There can be licences of grade A, B and C depending on the educational level of the dealer, years of experience in the trade and capital invested in the business. Dealers will be given an incentive to improve themselves. This licence could be issued by the Museum Department and by the Malta Financial Services Authority.

Why should we introduce the MFSA into the regulation of the sale of bullion coins in Malta and possibly into the business of coins which have a silver and gold content? Do you not think that over-regulation can kill what is really a very small market?

I would not think that the business of antique precious metal coins in Malta is a very small business. One has to consider that up to 25 years ago, English gold sovereigns were one of the principal forms of savings.

Old investment habits die hard and they are certainly about to experience a renaissance when the full story of financial malfeasance on Wall Street will be fully revealed. Who has not heard about the Enron accounting scandal? Since time immemorial people have hoarded gold coins as a precaution against disaster in the banking system.

Such disasters occurred in America and Europe in the Thirties and in Malta in the Seventies. The present banking troubles in the US cannot by any stretch of the imagination be compared to those of the Thirties, but the news which reaches us from Wall Street is very disquieting indeed.

Last Sunday I was watching a fine arts discussion on Bloomberg. There was a news flash about a possible deal between a group of great American banks and the government. It stated that they were prepared to pay a billion dollars to the American government if only it would stop its inquiries into their conduct in initial purchase offers (IPO) of shares.

This is to my mind a considerable acceptance of guilt. It is no wonder that I had a client who stated that full confidence among small stock exchange investors will not return before another 25 years... I think he had read that forecast in the Financial Times.

The existence of dealer houses throughout the world are a manifestation of the profit to the investor of having a part of his wealth in real goods; can you tell us what mistakes a collector can make in trying to safeguard his collectibles?

Investing in collectibles is not without its dangers. Thomas Vassallo Antiques is not only a trading establishment but also certainly one of the island's major antique furniture restoration centres. Malta has a fascinating history in furniture manufacture and in this island there has been activity in the imitation of all the great European furniture styles.

What is little known is that rich foreign residents have often brought their antique furniture with them which is later sold on the local market. This precious heritage is often in very bad condition through neglect and inexpert restoration. It can cause a massive decline in its monetary value. The biggest danger of all to collectibles is when the owner grows old and ceases to trust his heirs.

Matrimonial breakdown is also a threat. In such circumstances grievous mistakes can be made in the proper care of collectibles. There may be hasty disposal, unaided by expert advice, of the wealth of a household.

It often happens that lack of trust in one's family results in the concealment of gold coins and jewellery in the most unlikely of places. A dealer once told me how he had discovered 30 gold sovereigns in the bronze terminals of the headboard of an antique bed.

Do you think that the prices of precious metals are a guide to furniture and picture prices and investment in real goods?

They are a guide for when the interest in the acquisition of gold coins increases there is also a growing interest in the purchase of antique furniture. This is very much the present position.

Has the house of Thomas Vassallo Antiques ever dealt in coins?

We are in a position to state that there is a ready market both in Malta and abroad for good collections of Maltese coins both of the Phoenicians and of the Order of St John. My house is licensed to act as an intermediary.

It is ready to give advice and trade service on the matter of the prices of all antiques, including numismatic coin collections. This is based on its decades-long experience of dealing from its Merchants Street house.

What do you advise a collector to do before embarking on serious collecting which amounts to an investment?

The first thing to do is to calculate how much he can afford to pay and how long he is prepared to wait before he realises his investment. Capital is built up by waiting.

Today nobody in Malta who bought antiques 30 years ago has reason to regret his investment. This is why this house has a clientele which crosses its threshold year after year.

Does culture help a collector in making the right investment choices?

I dare say that the integrity and worth of a collection depends first and foremost on the culture of a collector. It is even a greater determinant than wealth. I have known a poor village collector who built up a formidable collection of the Order's coins.

It is important that one is focused and knows one's subject well. Specialisation is important. Books are a great help. In addition to books we have the marvellous collection in our National Museum of Fine Arts. The art collections in that museum extend from paintings to furniture, armour, silver and gold numismatic coins.

There is also a well equipped library of books on art criticism which had been built up over the years by the former curator of fine arts, Dr John Cauchi, who learnt his art at the foot of Sir Anthony Blunt, Soviet spy and keeper of the pictures of the Queen.

The Fine Arts Museum plays a highly educative role in this country and I advise my clients to consult its library before they make an important purchase.

It is very hard to find a Preti but paintings belonging to the school of Preti have appeared in many an auction and dealer's salesroom. Such paintings will be certainly increasing in value in the near future. John Spike, the author of the monumental catalogue raisonnè on Preti, is actively researching the subject.

Dr Spike has become an art connoisseur with a world reputation. During one of my business visits to London I saw him at Agnews, the fine art dealers, giving advice on a Tiepolo.

He was treated like a prince in that salesroom. His continuous visits to Malta demonstrate that there is yet massive hidden fine art wealth in Maltese houses.

My advice to art collectors is that they try to identify the worth of an object with the help of advice from a dealer, by consulting books and making use of the research facilities of the Museum of Fine Arts.

Can you mention any specific cases where the methodology you described was actually used to make the right investment choice?

I shall do so with the permission of the collectors in question, whom I informed about this interview. I must refer to a case when a collector asked my advice about the purchase of a rare coin belonging to one of the old kingdoms of northern Italy. It was a very large silver coin of a wonderful artistic design dark with age. I told him of the existence in our Public Library of a whole set of books on Italian numismatics.

These enormous volumes written by King Victor Emmanuel III of Italy had been donated to our Public Library by his son, the exiled King Umberto, when he visited Malta on his yacht. My client consulted these books and he realised that he had a chance to acquire a very rare coin at a moderate price.

Another time a client came to me with what looked like the die of a huge medal. He had bought it in the most unlikely of places, a shop selling second-hand goods. I immediately realised that this die could be the die of a medal marking a Grand Master's installation, and so it proved to be.

I advised my client to get permission to try to fix the die into the white metal proof of the commemorative medal of Grand Master Hompesch in the Museum of Fine Arts.

After due official permission had been granted the fit proved to be a perfect one. The work on the Hompesch medal had never been finalised due to the conquest of Malta by Napoleon. This client was very pleased by my advice and he has been a loyal patron of the Vassallo name ever since.

It cannot be said that all clients are prepared to carry out research, but the majority are, as can be attested by the growing demand for books published on the fine arts of Malta. Chief among them is Victor Denaro's book on Maltese silver, Ganado and Sammut on Napoleonic caricatures, Sammut and Cappielli on knightly coins and Galea Naudi on Maltese furniture.

It is evident that several collectors are forming a library and preparing themselves for the making of the right investment choice in buying a collectible. Such people will acquire an added thrill - both financial and artistic - when they realise that there is an international demand for the finest Maltese collectibles.

They will also discover to their surprise that Malta's position on the world's greatest trade route has brought collectibles to this island of an international standard and this not only refers to coins but also to such items as clocks and silver plate.

How do you think that the local fine arts market can be strengthened?

There could be a sale by both Government and the Church of fine arts objects surplus to requirements. This would serve to preserve these objects for they are unsatisfactorily stored as happens with surplus objects.

An engraving or print is much better preserved under glass in a private house than in a drawer among other objects. When fine arts objects circulate from one collection to another they build up the artistic education of a people.

They give work to dealers and auctioneers, and they provide a stream of visitors to our magnificent churches and museums. Investing in collectibles is not an idle pastime.