The prospect of investing in art has a uniquely attractive quality. First of all, many individuals hold a personal relationship with art, and the sheer depth of emotional responses it can invoke makes the creation and enjoyment of artwork an invaluable component of the human experience. Additionally, the art market has historically performed well, and is often unaffected by the economic variables that can sometimes wreak havoc on more traditional assets due to a low correlation to the stock market and other traditional asset classes. l In fact, a 2019 article by CNBC reported that long-term returns from art investments can rival those associated with bonds, and an index created by ArtPrice shows that the top of the art market has outperformed the stock market by over 5% since 2000.
As with any alternative asset, it’s critical for investors to understand the market before deciding on an investment strategy. In the case of art, that means understanding exactly what makes any particular work of art valuable. Unfortunately, the answer to this question is relatively complex, and the objective value of art is often heavily dependent on public and critical reception, both of which are subject to change based on any number of factors. Nonetheless, it is still possible to gain an incredibly helpful understanding of art as an asset class by evaluating the differences between the three main categories of artists and their respective work: Blue-chip artists, mid-career artists, and emerging artists.
A blue-chip artist is an established artist whose work consistently retains its value and is often sold for extraordinary prices on the secondary market (think Monet, Warhol, Picasso, etc.). Importantly, there is no set price point that objectively places an artist in this category, however they frequently sell individual works for amounts exceeding six-figures, and are usually internationally acclaimed names who inspire enthusiasm among seasoned collectors. Blue-chip artists typically feature a strong transactional history on the secondary market that spans at least one decade. Most importantly, the work of blue-chip artists has been absorbed by institutions, who will celebrate the art historical significance of the artist for generations to come. Further, blue-chip artists, or their Estates, are often represented by mega-galleries, who hold brick and mortar spaces in multiple major cities around the globe, and consistently present museum quality exhibitions.
The work of blue-chip artists is considered the least volatile in the art market, as the status is, in many cases, achieved posthumously, and values tend to appreciate reliably over time due to the iconic nature of the work.
A mid-career artist is simply anyone who has received regional or national recognition, whether through a series of publications, or through the presentation of their work in solo exhibitions, commercial art galleries, and even museums. There are no age or experience requirements for this category of artist; the classification can be applied to a creator at age 60 or 16. Mid-career artists have typically created a solid body of work and established a signature style that has developed over time as additional work series have been put forth. Artists in this category are commonly represented by established galleries who promote their work in both solo and group exhibitions, and can be selling work either on the primary or secondary market.
Investments in the work of a mid-career artist are slightly more volatile than those of the blue chip artist, as a sudden decline in quality or public perception can drive down the price of a mid-career artist’s work. However, the value of mid-career artwork also has more potential to increase sharply as the artist receives greater institutional recognition and an investment at the right time in the artist’s career could result in a sizable payoff.
An emerging artist is any artist who is beginning to achieve recognition for their work, but has yet to catch the broader attention of mainstream critics and the public. An emerging artist might be someone who recently graduated from a prestigious art school, or an older artist who has decided to focus on art full-time or who has recently made a breakthrough sale. Emerging artists have typically just begun to exhibit their work and are being shown alongside other artists in group exhibitions. Artists in this category may or may not have established representation and are normally not yet selling work on the secondary market. Instead, the artist or their primary dealer is involved directly in transactions.
The work of emerging artists is the most volatile, as it can be difficult to estimate how their work will grow in value over time. However, emerging artists also often see the sharpest upticks in the value of their work at the beginning of their careers, and investments at the right time can yield a potentially more sizeable return.
To conclude, there are countless opportunities in the art finance market that can earn investors healthy returns, including many that have historically outperformed more traditional investments. Although the valuation of art is certainly complicated, the volatility of any particular investment will be influenced largely by the type of artist, whether blue-chip, mid-career, or emerging. Above all, investors should be aware of the risk and reward profiles of each category, establishing clear and informed objectives before making any investment. If you’re interested in learning more about art finance opportunities, don’t miss the Art Equity Fund now on Yieldstreet.
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