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Artwork as an alternative investment has gained significant traction over the last few years, mainly based on how accessible the asset class has become.
However, most investors still think of art as an investment option reserved only for the ultra rich. Today, it is possible to buy shares of artwork just like stocks from various investment platforms.
So what kind of returns can be expected with an art investment?
How does art investing compare to other investments like stocks, bonds or real estate?
In this article, we take a deep dive on artwork investing returns.
Let’s jump in!
Artwork Investing Returns Explained
The return an investor can expect to make with artwork can vary widely.
In order to understand artwork investment returns, we need to first understand a few important details.
Consider for a moment Gerhard Richter’s painting from 1986 pictured above — “Abstraktes Bild.”
- The piece was purchased in 1999 for $607,000
- Just 16 years later the piece sold for $46.3 million at a Sotheby’s London auction
Now that’s a 7,500% or greater return!
However, most investors will not see a return quite that big. Returns on art investments vary depending on many factors – most notably the notoriety of the artist. Though other factors play a major role.
For example, the mere fact that many works of art sell through an auction can drive the price up or down based on social perception.
Investors that buy individual stocks understand that their returns are at a higher risk than an investor who buys market index funds.
Similarly, artwork investment returns have a massive range when considering individual pieces of art.
In order to generalize the returns of a particular asset class, we look at market indexes.
What Is A Market Index?
For the stock market, perhaps the most widely used index is the S&P 500, which is a stock market index tracking the stock performance of 500 large companies listed on stock exchanges in the United States.
The Artprice 100 attempts to achieve the same for the art market.
Artprice 100 Artwork Index
The Artprice 100 index is a great place to start when thinking about artwork investment returns.
“The Artprice 100 essentially identifies the 100 top-performing artists at auction over the previous five years who satisfy a key liquidity criterion (at least ten works of comparable quality sold each year).
The weight of each artist is proportional to his/her annual auction turnover over the relevant period. Thus, starting from 1 January 2000 – the Artprice100®’s reference year – an investment is made on the 100 artists whose auction results are the most regular (constant) and the highest (in turnover terms) during the previous five years (i.e. 1995, 1996, 1997, 1998 and 1999).
The composition of the index does not change during the year. Therefore, the overall value of the Artprice100® evolves according to the individual average performances of each artist in the portfolio, adjusted according to his or her weight within the portfolio.” – Artprice.com
Stated in another way, the Artprice 100 could be considered an index of “blue chip” art.
This is a stock market term that refers to high quality and time tested companies that are viewed overall to be solid investments. An example would be Coca Cola stock.
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Art Returns vs Stock Market Returns
Since the launch of this index in 2000, the Artprice 100 has shown impressive results:
- On average, the index has grown by 10.24% year over year since 2000
- The S&P 500 over the same period of time has averaged 7.05%
In 2021, the Artprice 100 index saw a 36% increase vs the S&P 500’s +27%.
Of course, the Artprice 100 only tracks the sales of the top 100 artists. Keep in mind, the S&P 500 tracks 500 companies. So this is really a comparison of the 100 top artists versus the 500 top companies, not the entire stock market versus the entire art market.
Total Art Market Returns
- The total art market between 1985 and 2018 has averaged roughly +5.3% returns
- Contemporary art on the other hand, has averaged +7.5%
Masterwork’s also conducted its own study and found that Contemporary art has outperformed other asset classes. The platform has tracked contemporary art produced after 1945 that has sold at least twice.
Using this criteria, Contemporary art from 1995 to present has returned 13.8%.
Compare that against the following:
- S&P 500: +10.2%
- Real Estate: +8.9%
- Gold: +7.2%
It must be noted that comparing returns among various asset classes is good for directional understanding only. Each asset class comes with its own unique set of risks and nuances.
Lastly, past results do not guarantee a similar outcome tomorrow.
The age old maxim “high risk, high reward” may ring true for artwork investments.
Returns in the world of art can vary dramatically.
A painting like Abstraktes Bild, that saw a $45.7 million increase in value in just 16 years, demonstrates just how lucrative a single piece of art could be.
However, the likelihood of an investor to stumble upon the work of an up and coming Picasso or Monet, is unlikely.
Artwork returns, like individual stocks, can be difficult to predict. With this in mind, we often look towards an index to better understand the market as a whole.