Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Blue chip art has beaten the S&P by over 250% - but how do you invest?

For the first time ever, companies like Masterworks are making it possible for everyone to buy shares in multi-million-dollar paintings.

 

If you’re thinking about investing in non-traditional asset classes, fine art may be high on your list of options to explore. Over a span of several decades, fine art’s favorable investment characteristics, such as its ability to act as a store of wealth to hedge against inflation and currency devaluation, have made it an increasingly attractive asset class for wealthy families, knowledgeable collectors and a growing number of professional wealth managers. Particularly, there has been a focus on “blue chip” artists whose works carry the highest price tags and have the largest collector base. This segment of the art market has seen incredible value accretion since 2000, outperforming the S&P 500 by over 250%.

[ArtPrice 100]

Strong Historical Art Market Performance Rivals the S&P 500

Investing broadly in the art market is not always possible, nor is it a sound financial strategy. Instead, as the discerning collector knows, certain areas have historically outpaced others in terms of performance. While the general art market has seen uneven and temperate growth, one segment stands out as a consistent winner—the market for works by blue chip artists.

Over the past 18 years, the leading index for the 100 most important artists in the market reflects an annual price appreciation rate of 8.9%, while the S&P 500 returned 3.4% in the same time frame. According to ArtPrice, the index is assembled objectively using its extensive database of over 6,300 auction houses and weighted by an artist’s average performance over the last five years. The index is adjusted annually, just as with a stock index, and newly successful artists join while those who are no longer relevant are excluded.

We can also point to a specific example, by an artist who is ranked second in the ArtPrice100 for 2017, to understand how prices have changed in real terms. Masterworks.io purchased a Reversal Series painting of Marilyn Monroe by Andy Warhol from Phillips last November for $1,815,000. One advantage of this series is that price appreciation can be calculated with relative ease since Warhol created numerous paintings between 1979 and 1986 using the same silkscreen technique and subject matter, so that while the images vary by color scheme, other attributes remain relatively constant, providing a wealth of relevant auction sales data. Based on an analysis of auction sale records for 43 Marilyn Reversal paintings over the past 28 years, the historical price increase has been around 11.25% annually, or a total increase in value of over 750%.

Lack of Correlation Between Fine Art and Traditional Asset Classes

Alternative investments are appealing for portfolio diversification because they are relatively uncorrelated with traditional assets, and art is no exception. During the financial crisis of 2007 to 2009, the decline in art prices for the top 100 artists was estimated at between 26% and 28%, while the S&P 500 declined 56% from its peak. As a result, blue chip art presents an opportunity for investors worldwide who want to include it as part of their alternative asset portfolio management strategy and lower their overall risk through diversification.

Economists have used various approaches to calculate the correlation between art prices and other asset classes. Based on their research, it is believed that the coefficient between art prices and the S&P 500 lies between -0.03 and .19. The relatively low correlation signals that when equity markets decline, fine art is more likely to retain its value. Art markets, however, are not immune to systemic risk, and in 2009, there was a sharp contraction in the number of expensive artworks being purchased.  This decline in volume occurred just as stock prices were beginning to rebound, reaffirming the view that art lags equity markets by six to eighteen months. Historically, slumps in the art market have been characterized more by a lack of liquidity and lower sales volumes than sharp declines in value or prices paid for important works.

Risk-Adjusted Returns Within the Art Market

Any measure of risk-adjusted returns attempts to calculate the gain on an investment relative to the level of volatility in the portfolio. The higher the risk, the less a given return is worth.  Fine art, like the stock market, has riskier and safer options from a financial perspective.

The division between speculative and established blue chip artists is complex, although price often serves as a signal in the marketplace. While you can acquire a painting for as little as $5,000 at any number of New York galleries, in hopes that it will one day be worth millions, the chances of doing so are on par with winning the lottery. On the other end of the spectrum, so called “investment grade” art, which carries a six-to-eight-digit price tag, has a strong collector base and much more predictable appreciation rates.

Masterworks Makes it Possible to Invest in Blue Chip Artists 

Until recently, investing in paintings by a high-caliber artists like Andy Warhol was available only to a handful of the world’s population, but a New York-based startup is looking to change that dynamic. In the same way that minority investments in real estate have become possible through REITs and online platforms, Masterworks.io is making it possible for non-accredited investors to buy into works valued at $2 million and up by filing them with the SEC as Reg A+ securities.

To learn more, go to www.masterworks.io.

Disclaimer: MASTERWORKS IS  “TESTING THE WATERS” UNDER REGULATION A UNDER THE SECURITIES ACT OF 1933. THIS PROCESS ALLOWS COMPANIES TO DETERMINE WHETHER THERE MAY BE INTEREST IN AN EVENTUAL OFFERING OF ITS SECURITIES.  MASTERWORKS IS NOT UNDER ANY OBLIGATION TO MAKE AN OFFERING UNDER REGULATION A. MASTERWORKS MAY CHOOSE TO MAKE AN OFFERING TO SOME, BUT NOT ALL, OF THE PEOPLE WHO INDICATE AN INTEREST IN INVESTING, AND THAT OFFERING MIGHT NOT BE MADE UNDER REGULATION A. IF MASTERWORKS GOES AHEAD WITH AN OFFERING, MASTERWORKS WILL ONLY BE ABLE TO MAKE SALES AFTER IT HAS FILED AN OFFERING STATEMENT WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) AND THE SEC HAS “QUALIFIED” THE OFFERING STATEMENT. THE INFORMATION IN THAT OFFERING STATEMENT WILL BE MORE COMPLETE THAN THE INFORMATION MASTERWORKS IS PROVIDING NOW, AND COULD DIFFER IN IMPORTANT WAYS. YOU MUST READ THE DOCUMENTS FILED WITH THE SEC BEFORE INVESTING.

NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED, AND IF SENT IN RESPONSE, WILL NOT BE ACCEPTED. NO OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE CAN BE RECEIVED UNTIL THE OFFERING STATEMENT FILED BY THE COMPANY WITH THE SEC HAS BEEN QUALIFIED BY THE SEC.ANY SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY KIND, AT ANY TIME BEFORE NOTICE OF ACCEPTANCE GIVEN AFTER THE DATE OF QUALIFICATION.

AN INDICATION OF INTEREST INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND.

BY USING THIS WEBSITE, YOU ACCEPT OUR TERMS OF USE TERMS OF USE AND PRIVACY POLICY. ANY PERSON INTERESTED IN INVESTING IN ANY MASTERWORKS OFFERING SHOULD REVIEW OUR DISCLOSURES AND THE PUBLICLY FILED OFFERING STATEMENT RELATING TO THAT OFFERING, A COPY OF WHICH WILL BE AVAILABLE ON THIS WEBSITE.

AFTER THE OFFERING STATEMENT HAS BEEN PUBLICLY FILED YOU MAY OBTAIN A COPY OF THE PRELIMINARY OFFERING CIRCULAR THAT IS PART OF THAT OFFERING STATEMENT AT WWW.MASTERWORKS.IO.

MASTERWORKS IS NOT REGISTERED, LICENSED OR SUPERVISED AS A BROKER DEALER OR INVESTMENT ADVISER BY THE SECURITIES AND EXCHANGE COMMISSION (SEC), THE FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA) OR ANY OTHER FINANCIAL REGULATORY AUTHORITY OR LICENSED TO PROVIDE ANY FINANCIAL ADVICE OR SERVICES.

MASTERWORKS ADMINISTRATIVE SERVICES, LLC IS LOCATED AT 251 LITTLE FALLS ROAD, WILMINGTON, DE 19808.

THIS WEBSITE CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES. FORWARD-LOOKING STATEMENTS ARE GENERALLY IDENTIFIABLE BY USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS “MAY,” “WILL,” “SHOULD,” “POTENTIAL,” “INTEND,” “EXPECT,” “OUTLOOK,” “SEEK,” “ANTICIPATE,” “ESTIMATE,” “APPROXIMATELY,” “BELIEVE,” “COULD,” “PROJECT,” “PREDICT,” OR OTHER SIMILAR WORDS OR EXPRESSIONS. FORWARD-LOOKING STATEMENTS ARE BASED ON CERTAIN ASSUMPTIONS, DISCUSS FUTURE EXPECTATIONS, DESCRIBE FUTURE PLANS AND STRATEGIES, OR STATE OTHER FORWARD-LOOKING INFORMATION. OUR ABILITY TO PREDICT FUTURE EVENTS, ACTIONS, PLANS OR STRATEGIES IS INHERENTLY UNCERTAIN AND ACTUAL OUTCOMES COULD DIFFER MATERIALLY FROM THOSE SET FORTH OR ANTICIPATED IN OUR FORWARD-LOOKING STATEMENTS. YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON ANY OF THESE FORWARD-LOOKING STATEMENTS.
Continue with Google
or
Sign up with Email