Art investment is beautiful alone: 30% up in 18 months, unaffected by any asset

More and more people see art as an asset class similar to stocks and bonds.

Since the outbreak of the pandemic in 2020, the art market has rapidly changed in order to attract and cater to younger, more diverse and more tech-savvy collectors.

Buying works by living artists with diverse styles and buying art through digital channels such as NFTs is the current trend, citi (Citi) recently released the 2021 Global Art Market Report, which predicts that if these trends continue, the growth and evolution of the art market will further accelerate in 2022.

Suzanne Gyorgy, global head of art consulting and financing at Citi Private Bank, said: "We are at a turning point. ”

This shift is partly due to the growing number of people who now see art as an asset class similar to stocks and bonds, which was rare among collectors in the past.

"In the past, art collectors were collectors and connoisseurs who were passionate about art, and they would do research and research on the collection," Georgie said.

This shift in the market can be seen in the soaring prices of art now. Citi quoted Masterworks.io's All Art Index as saying that in the 18 months to June 2021, the price of art at public auction in most categories rose by 28.2% from december 2019 levels.

The report shows that developed-market equities returned 31.4 percent, emerging-market stocks 28.4 percent and investment-grade bonds 3.1 percent over the same period. However, the price of art is often uncorrelated to any other asset class and can be a very attractive complement to a portfolio.

Citi looks at art from the perspective of a collector and does not include art as a category in the bank's client asset allocation model. But Citi's investment strategists said in the report that if more and more investors invest in the art market or one of these categories (such as contemporary art), it is also a way to reduce portfolio risk.

In addition, art is also an effective way to protect wealth, Georgie said: "This is because the art market has always been very stable." This is especially true for collectors who focus only on the finest works of art, but Georgie believes that a diverse collection can also have a stable effect.

The rise of NFTs is the most talked about topic in the art market in 2021. ArtTactic founder and managing director Anders Petterson wrote in the Citi report that the NFT has created "a new way to consume art and collectibles," attracting "younger audiences in the digital age" and bringing great disruption to the art market.

Peterson said NFTs are easy to trade and don't require middlemen — which brings value beyond the aesthetic value of the artworks — and that NFTs offer digital artists a way to monetize.

Such works of art also quickly and thoroughly integrated into the traditional art field, which consisted of auction houses and dealers who had previously been looking for an appeal to young collectors. The accelerated development of NFTs and virtual galleries, among others, has accelerated this trend.

Georgie said: "The epidemic and virtualization have made the art market attract a lot of people who are used to surfing the internet. ”

She said auction houses quickly adopted NFTs because they gave them immediate access to new bidders, creating a new customer base that might end up buying physical art.

She said: "This way began to stimulate some people's desire to collect. ”

The beginning of the attention of auction houses for living artists such as Amy Sherald and Jadé Fadojutimi is another trend that began in 2020 and has been accelerating, with works by contemporary artists mostly previously sold only through galleries and other private dealers.

The auction house has even created new auction categories such as Ultra-contemporary, such as Sotheby's The Now category and Christie's "21st Century" category.

Citi art consultant Betsy Bickar wrote in the report that auction houses have also raised awareness of existing auction categories that sell young, emerging artists, such as Phillips, an auction house that has been featuring such artists in 2021.

The relationship between the institutions of the art world is changing as a result. As an example, Bill carr noted that auction houses are planning to collaborate with galleries to host exhibitions, and larger established dealers such as David Zwirner and Jeffrey Dietsch are reaching out to a new group of collectors by partnering with smaller, emerging galleries.

The flood of money flowing into the field of "ultra-modern" art is driven by collectors across the globe. "A lot of the emerging wealthy are buying the work of these emerging contemporary artists," Georgie said. ”

As in any emerging market, time will tell if some of the artists who make headlines today will have lasting influence. "If you buy purely for investment, you get some gains, but sometimes you also lose money," Georgie said. ”

A potential drag on the art market in the coming year is the upward momentum in global interest rates, which will lead to higher loan costs secured by art collections. In addition, sharp fluctuations in the market may reduce the disposable income that wealthy collectors spend on art purchases.

In recent decades, the art market has also benefited from the growth of the global super-rich population. "The increase in the number of multimillionaires and billionaires means a greater potential demand for expensive art," the report states. If this trend reverses – such as the shrinking value of the portfolios of such people – it could put downward pressure on the art market. ”

| Abby Schultz, a writer for Barron's

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Original barronschina articles, not reproduced without permission. For the English version, see "Art Market to Expand ifPassion for Living Artists, Digital Works Continues" on March 17, 2022.

(This article is for your informational purposes only and does not constitute the provision or reliance of investment, accounting, legal or tax advice.) ）

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