Investors who are interested in the art market have plenty of company, as art as an investment continues to grow in popularity, according to Straits research. After all, the global market generated almost $68 billion in 2021, the second-highest value in the last 15 years.
Within that market is blue-chip art, which demands the highest prices, and as investments, offers some of the highest returns. Over the last 20 years, work by top blue-chip artists has increased considerably in value.
With all that in mind, here is a guide to investing in blue-chip art.
This generally refers to works produced by the world’s most recognizable and important artists, whose pieces consistently sell for high prices and at volume. Every blue-chip artist has a well-established collector base, and their works consistently increase in value over time.
By one oft-used rule of thumb, an artist is considered blue chip if they have produced works that consistently sell for more than $500,000, have annual sales volumes of more than $10 million, and have been selling at auction for at least a decade.
Note that the term “blue chip” is borrowed from the commonly used description of a stock in a well-established and profitable firm.
To discern whether a piece is blue chip, investors should pay attention to two factors: the price and the artist.
The price for a blue-chip work of art can generally range from a few hundred thousand dollars to hundreds of millions of dollars. Such investment-grade art has a comparatively longer performance history as well.
Then there is the artist, which can be another key indicator of blue-chip art. Blue-chip names such as Jean-Michel Basquiat, Claude Monet, or Jeff Koons are widely recognized, even beyond the art world.
It is advisable for investors to stay atop of indices such as the Artprice 100, which tracks top auction performers.
A few of the most prominent blue-chip artists include:
While both terms have a color in their name, they are quite different. In fact, they are opposites. Blue-chip art is produced by artists who have established reputations and histories of success. On the other hand, red-chip artists are generally emerging or upcoming artists who are creating work on the primary and secondary markets.
Modern artists currently top the list of best performers, followed in order by post-war artists, contemporary artists, and those from the 19th-century. Demand for modern artists continues to grow, which decreases risk and increases the potential for favorable returns.
Art galleries globally record a major chunk of all art sales – some 51% in 2016 – helped by digitalization and improved transparency.
Blue chip art is also primarily sold at art auctions. Because the work of such artists is high in demand but low in supply, they commonly spark bidding wars at such events.
While every investment carries risks, there are advantages to investing in blue-chip art, namely:
No investment is perfect, and there are drawbacks to putting capital in blue-chip art:
The market for art as a collectible asset is surging and has been growing for some time now. In 2016, some 73% of wealth managers expected their clients to include collectible assets such as art in their wealth, according to a Deloitte Art & Finance Report. Two years later, art investment achieved a notable 10.6% return.
These days, while baby boomers comprise the largest share of art collectors, millennials globally are the world’s fastest-growing group of collectors. They generally not only see the value in art pieces, but they seek to use the investments to build generational wealth.
After all, art has outperformed the S&P 500 since 2000, returning more than 360%, according to the ArtPrice100 Index. The value of art, on average, has increased by 30% over the last 20 years. This year, the market topped the luxury investment index.
There was time in the not-too-distant past during which blue-chip art was housed in galleries and museums and accessible to a precious, monied few. But the shift from speculative collectibles to an entire asset class has rendered blue-chip art much more accessible to retail investors.
As for how to invest, the work of blue-chip artists has consistently performed well at auctions such as Christie’s and Sotheby’s. It is also still possible for investors to physically buy blue-chip art and profit by lending the works to museums and galleries. However, that requires maintenance and long-term storage costs.
Nowadays, there are ways to invest in blue-chip art through the stock market as an underlying asset. Then there is the investment platform Yieldstreet, which offers opportunities in alternative asset classes, makes breaking into art investing accessible and comparatively easy.
Yieldstreet, on which nearly $4 billion has been invested to date, offers a fractional art opportunity in which investors can own portions of a diversified pool of artworks by emerging, mid-career, and blue-chip artists, with a minimum of just $10,000. To date, the company has funded more than $400 million worth of fine art investments.
Because it uses third-party appraisals and expertise, and analyses from a proprietary database, Yieldstreet removes the guesswork from art ownership. And there are no art maintenance or ownership fees.
Another important reason to add art to investment holdings includes diversification. As mentioned earlier, investing in alternative assets such as art can not only protect against inflation or other economic downturns, but it can reduce overall portfolio risk. Long-term successful investing depends on a diversification strategy.
Alternative investments can be a good way to help accomplish this. Traditional portfolio asset allocation envisages a 60% public stock and 40% fixed income allocation. However, a more balanced 60/20/20 or 50/30/20 split, incorporating alternative assets, may make a portfolio less sensitive to public market short-term swings.
Real estate, private equity, venture capital, digital assets, precious metals and collectibles are among the asset classes deemed “alternative investments.” Broadly speaking, such investments tend to be less connected to public equity, and thus offer potential for diversification. Of course, like traditional investments, it is important to remember that alternatives also entail a degree of risk.
In some cases, this risk can be greater than that of traditional investments.
This is why these asset classes were traditionally accessible only to an exclusive base of wealthy individuals and institutional investors buying in at very high minimums — often between $500,000 and $1 million. These people were considered to be more capable of weathering losses of that magnitude, should the investments underperform.
However, Yieldstreet has opened a number of carefully curated alternative investment strategies to all investors. While the risk is still there, the company offers help in capitalizing on areas such as real estate, legal finance, art finance and structured notes — as well as a wide range of other unique alternative investments.
Blue-chip art as an investment is increasingly accessible and can diversify holdings. Despite possible drawbacks, putting capital in top-shelf art works can also provide steady returns and stability or appreciation, regardless of a fluctuating economy.
Yieldstreet provides access to alternative investments previously reserved only for institutions and the ultra-wealthy. Our mission is to help millions of people generate $3 billion of income outside the traditional public markets by 2025. We are committed to making financial products more inclusive by creating a modern investment portfolio.