Culture, Art and Finance Collide

What does fine art have in common with the stock market?

The answer: Not much!

That is why investors are leaping into the art scene with deep pockets.

While COVID-19 had a devastating impact on the creative industries with empty stadiums, galleries, cinemas, and the pockets of many artists around the world, the crisis also fuelled some significant innovation. Since 2020, we have seen a transformation in the way art is delivered to us, whether it be digitised art exhibitions, computer auctions, or virtual museum tours, artists and their dealers are finding new ways to grow.

The acquisition of art collections and investment in emerging artists is the latest trend that artists are cashing in on. So why, despite the dismal income forecasts precipitated by the pandemic, have we seen so much capital circulating the art industry?

Of course, the answer is Alternatives!

In the current market environment of low yields and rising interest rates, art collectibles are an increasingly attractive asset class. Their low correlation to macroeconomic performance and high-growth potential have put them on the map for many investors seeking to diversify their portfolios and shield losses from market volatility.

So, let’s take a closer look into the current market and why art is experiencing its “second renaissance”.

Market Prosperity

In 2020, the global art market represented an estimated value of US$1.7 trillion which is predicted to grow to US$2.125 trillion in 2023. With an annual transaction volume of US$60 billion art is a massive asset class that competes alongside other major private markets. But despite its prosperity, participation has been low in years gone by.

For centuries, art has proven its viability as an investable asset. Auction houses like Sotheby’s and Christie’s have been operating for over 200 years to facilitate these trades. Blue-chip art has unequivocally demonstrated its ability to increase in cultural value resulting in an overall increase in net value. However, the eye-watering pricetags of Blue-chip art meant that it was inaccessible to most investors.

Traditionally, this type of investment was reserved for ultra-wealthy and high-status individuals who had exclusive access to the art market. However, more recently with the help of technological innovation, some market research, and emerging fintech aggregators, investment opportunities in the art world have been opened up to a new class of investors.

Masterworks is a great platform for anyone looking into this asset class.

Pandemic shift

When the world stopped due to the pandemic, global cash flow surged. Money was readily available at historically low-interest rates and people became interested in making money in new ways that didn’t involve heading into an office. Of course, people also wanted to continue accessing and experiencing the beauty of art outside of a museum. This shift coincided with a digital transformation in the industry.

Virtual art fairs and online viewings suddenly became available and people were willing to invest without previewing physical works. In 2021, 37% of art sales were completed through online channels, accounting for 25% ($US12.4 billion) of the market’s overall value; a 9% increase from 2019.

Diversification

To give you an example of the opportunities involved in art; in 2018, a Banksy work “Love is in the Bin” was sold for US$1.4 million. At the end of 2021, the same work sold for US$25.4 million, a roughly 1650% return on the owner’s original investment over a period of just 3 years!

Of course, we are not saying that all art investments will result in such mammoth profit margins but this example does demonstrate the increasing value and opportunities that await those who are willing to invest differently.

Yieldstreet is one of the more notable alternative investment platforms that is seeking to democratise access to art. They have thrust themselves into the art market most recently partnering with Jean-Michel Basquiat’s family which will open access to an exhibition showcasing over 200 never-before-seen artworks by Basquiat. In Addition to this, Yieldstreet has established Art Fund II, dedicated to investing in emerging artists who are influenced by the Harlem Renaissance movement, in particular supporting BIPOC and female artists.

Masterworks is exclusively committed to democratising art by fractionalising investments. Their research teams analyse market data to identify which artworks and artists have the most appreciating momentum. After purchasing the artworks, they securitise the work and make it available to clients who wish to buy shares. They have invested in artists like Picasso, Warhol, Basquiat, and Banksy who have historically made massive gains in previous sales.

A similar alternatives model is Otis, who invest in cultural assets like card games, books, art, NFTs, and even sneakers. The founders created the fund to invest in their passions and we love some of the obscure yet valuable assets available. It just goes to show that modern investing can cater to everyone’s interests, whether that be the stock market or sneakers!

The final company of note is OpenSea, an online platform that enables users to trade NFTs relating to art, music, trading cards, and even domain names! Through an entirely digital ecosystem, creators and collectors can generate meaningful income through blockchain technology.

While Stropro is yet to enter the art scene, we are excited by the world of opportunities that await our platform as we evolve. In the meantime, we have focused on the foundations for the company and our infrastructure is world-leading. Our current investment opportunities will enable us to scale and expand our product offerings. Expect some great global investment opportunities in 2022!

Written by Holly Brooks

This article has been prepared by Holly Brooks. Holly Brooks is an Analyst of Stropro Operations Pty Ltd (ABN 28 633 603 399) (Stropro). This article is for educational purposes and is not a substitute for professional and tailored financial advice. This article expresses the views of the author(s) at a point in time, which may change in the future with no obligation on Stropro or the author to publicly update these views. This article uses information from sources the author considers to be reliable but does not represent that such information is accurate or complete, or that it should be relied upon. Past performance is not a reliable indicator of future performance. Investments may rise and fall in value and returns cannot be guaranteed. Stropro makes no representations or warranties, express or implied, as to the accuracy or completeness of the information it provides. Stropro Operations Pty Ltd (ABN 28 633 603 399) is a Corporate Authorised Representative (CAR №1293257) of Stropro Compliance Pty Ltd (ABN 74 640 214 740, AFSL №533443).