Opportunities Amid Uncertainty: Art

February 9, 20234 min read
Opportunities Amid Uncertainty: Art
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The Paul Allen Collection, which sold earlier this month, was the biggest sale in auction history, fetching $1.5B in a single evening. The impressive feat occurred at a time of high economic uncertainty, record inflation, and geopolitical unrest — revealing how high-net-worth art buyers are still raising their paddles for truly exceptional collections. Their confidence rests on the market’s resilience, with record prices still being set even after a global pandemic and amid economic turmoil. 

Art as an investment goes beyond a single night’s auction performance. Amid the market downturn, it offers three specific benefits to investors who may be seeking to insulate their returns from broader market forces. 

  • Art has demonstrated historical appreciation over time, with a track record for strong performance in times of economic turmoil.
  • Art investments have shown low correlation with the performance of other asset classes, and can be a potential hedge against inflation. 
  • The art market is growing and is ripe with opportunities for new and established investors in the space.

Hedge against high inflation

Historically, art has been a source of wealth, both during periods of prosperity and during market uncertainty. Ultra-high-net-worth investors have long recognized the asset as an excellent store of value through any market environment. 

For example, contemporary art alone has offered an annual return of 14% over the last 25 years, as of December 2020, versus a 9.5% annual return from the S&P 500, according to the Citi Global Art Market report.

The resilience of the art market comes into focus when we look at its performance during down markets. During the Global Financial Crisis of 2008 for example, the art market bounced back to pre-recession levels in a span of two years, compared to the five years it took for equity markets.

The rebound of the art market after COVID-19 was even more pronounced, with auction sales seeing a 47% jump in 2021 as compared to the prior year, largely due to nimble adjustments by the auction houses to the new online environment. Volume in transactions also bounced back after a substantial dip of 23% in 2020, with transactions increasing by 17% to an estimated 36.7 million transactions across both the auction and dealer sectors.1 

Diversify your portfolio 

Art has low correlation with other asset classes, including those in equity and fixed income markets. As a result, wealth managers are increasingly recognizing the asset class as a strategy to diversify  their client’s portfolios. According to the 2021 survey conducted by Deloitte, 85% of wealth managers agreed that art should be provided as a wealth management service — up from 53% in 2014. 

Invest in a growing market

The art market is expanding rapidly, whereby the number of international collectors is constantly growing and interest from the younger investors is on the rise.

Meanwhile, international sales are booming, with online sales in particular leading the charge. Digital sales hit $12.4B in 2022, their highest-level yet, and 37% of collectors have voiced that they prefer to buy work online, up eight points from 2020.2

At the same time, the art fairs, which many anticipated might diminish in number and popularity post-pandemic, are back in force, with 74% of surveyed collectors reporting that they’re buying at those marquis events. 

Why Yieldstreet for art investment? 

Yieldstreet is the only platform that offers both art equity AND art debt investment opportunities. Each deal structure comes with its own set of benefits amid a market downturn, which is summarized below. 

  • Art Equity 
    • Diversified funds that hold a number of artworks with the most iconic imagery created by the most highly sought after artists, which reduces concentration risk for investors. 
    • Buy and hold investment with terms of 5 years to allow for value appreciation 
    • Investors are able to take part of the hot market at a much lower entry point than if they were curating such a high quality collection on their own 
  • Art Debt
    • ONLY place to invest in art-backed debt 
    • Monthly income generating product through which investors are investing in a diversified pool of asset-backed loans, with the underlying collateral being fine art. 
    • Loans are extended against artworks created by blue-chip artists with demonstrated depth of market, as confirmed by Athena’s proprietary data analytics, providing confidence that works could be liquidated in a relatively short period of time to recoup investor funds in an event of default. 
    • All loans are originated and underwritten by Athena Art Finance, whose disciplined process is focused on the borrower, collateral and loan structure, and has yet to realize any losses 

Invest in art on Yieldstreet

Explore our open opportunities

1 https://www.artbasel.com/about/initiatives/collectors-report-2022-pdf-download
2 https://icg.citi.com/icghome/what-we-think/citigps/insights/global-art-market-disruptions-pushing-the-boundaries

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