Contemporary art is an asset class that has proven resilient through various market cycles, posting a compound annual return of 14.1 percent from 1995 to 2020, according to Masterworks data, while the S&P 500 posted a total annual return of 9.9 percent over the same period and scored a percent goal.
The visual arts have a cultural significance not found in traditional asset classes because their influence transcends generations. Throughout history, battles have been fought to capture, defend, and restore artworks.
Prices are heading north!
Given the pain people have put in to acquire this valuable business, it makes sense that prices for this asset class will continue to rise.
Traditionally, competition for valuable works of art has been restricted to the elite circle of very wealthy individuals and institutions. However, the global art market is becoming more inclusive as one of the largest buyers of artworks in the world allows individuals to invest in some of the most desirable works in the market.
Masterworks is the first platform that allows unaccredited investors to buy shares in individual artworks. The company acquires artwork that is expected to increase in value, as well as shares for private investors.
The company keeps the painting until it finds the best time to sell it, which is usually within three to ten years. Investors also have the option to sell their shares on the secondary market of Masterworks after a minimum holding period.
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Recent shows include Pablo Picasso’s Homme à la Pipe (1968) and Ed Ruscha’s Ripe (1967). Portions of works by artists such as Andy Warhol, Claude Monet, Banksy and Jean-Michel Basquiat are also available on the secondary market.
Masterworks Sells Albert Olin Painting for $2.7 Million!
Masterworks, the alternative investment platform that enables retail investors to buy shares in famous works of art, has announced the sale of Albert Oehlen’s double portrait (2002) for $2,700,000.
The company put the board up for sale in January 2021 for $1,887,000 at $20 a share. Investors who held their shares until the board was sold received an internal rate of return (IRR) of 33.8%, net of all costs and fees.
Masterworks acquired Doppelbild (2002) in December 2020 in a privately negotiated deal from a private collector. The painting, which measures 57 x 95 cm, is part of a larger series of abstract paintings created after the 1990s that Olin sarcastically describes as “post-non-representational painting”. The painting featured prominently in Max Heitzler’s gallery exhibition at the Essential Art Gallery in Switzerland in 2016, where it was acquired by a private collector.
Art as an investment
Investing in art might not be as popular as stocks or cryptocurrencies, but it is an asset class that is definitely gaining in popularity as interest in alternative investments increases.
Why invest in art?
At an auction in 2017, the painting “Salvador Mundi” by the famous artist and inventor Leonardo da Vinci sold for 450 million dollars. But in 1958, Salvador Mundi fetched only $60 at auction on suspicion that the work was just a copy. Increase from $60 to $450 million in 60 years? Even Microsoft and Apple are jealous of such an increase in value.
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Finding assets that are not tied to the public markets involves some trade-offs. Buying art is easy, but selling artwork can be more complicated. Because art is not like stocks or mutual funds that you can ignore for 20 years and then make huge profits.
Acquiring art is not only a financial one, but an emotional one as well. Because the artwork should not only have intrinsic value, but also should satisfy the individual buyer. After all, no one buys an ugly painting just because they think it will someday be sold for a profit. Here are some considerations to keep in mind when learning how to invest in art.
Panels offer widely different benefits than traditional investments, especially when you take into account diversification, aesthetic appeal, and low consumption.
Diversify without market risk
Dealing with the financial markets is always a matter of risk. Market risk is the systemic risk inherent in the stock market that cannot be diversified away. No matter how many cheap index funds you buy, you will always lose money in an economic downturn. But artworks are not tied to a stock index or market. By purchasing artwork, you create value completely independent of the stock and bond markets.
Aesthetically pleasing assets
Excited to take a look at the stocks in your brokerage account? Probably not, because the stock is really just a boring legal document. On the other hand, art is an asset that you can hang on the wall and enjoy while appreciating its value.
“Rust never sleeps,” Neil Young once said, and this is especially true when it comes to true origins. Homes deteriorate, cars break down, and even people slow down with age. However, art does not lose value. The 500-year-old painting is more valuable today than it was when the European king who first wanted it ordered it.
Technical investments for further diversification
The art market is full of illiquid assets and asymmetric information, but that doesn’t mean you should avoid them. Art returns have outperformed the S&P 500 in recent years, and art hasn’t moved in leaps and bounds with the financial markets.
Becoming an art investor requires a lot of capital and time, but the benefits are obvious. Finding a rare piece of art is a faster path to riches than betting on volatile stocks. Think of art as a builder of wealth and a way to separate wealth from the financial markets.
This post first appeared on Benzinga:
https://www.benzinga.com/news/22/02/25821457/masterworks-sells-albert-oehlen-painting-for-2-7-million-resulting-in-a-33-8-net-irr- for investors
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