The art market has rapidly transformed to attract and adapt to younger, more diverse and increasingly tech-savvy collectors since the start of the pandemic in 2020.
If current trends to buy the art of living, different artists, and to buy via digital channels, including markets for non-fungible tokens or NFTs, continue, Citi predicts that the art market will grow and evolve “further and more. quickly “this year, according to a 2021 global art market report released Tuesday.
“We are at a transition point,” says Suzanne Gyorgy, Global Head of Art Advisory and Finance at Citi Private Bank.
This transition is fueled, in part, by the growing treatment of art as an asset class similar to stocks and bonds, an approach to art that few collectors once openly had.
“They collected art because they became passionate collectors and connoisseurs and did research and due diligence,” says Gyorgy.
An explanation for the change can be found in the skyrocketing prices for a number of works of art. In the 18 months ending June 2021, prices in most categories of public art auction sales increased 28.2% from December 2019 levels, Citi reported citing the latest data available from the All Art Index of Masterworks.io.
Over the same period, developed market equities returned 31.4%, emerging market equities 28.4%, and investment grade bonds returned 3.1%, according to the report. Art, however, generally does not perform in sync with any other asset class, which can make it an attractive addition to a portfolio.
Citi looks at art from a collector’s point of view and does not include it as a category in asset allocation models for clients. But in the report, the bank’s investment strategists said that investors could reduce the risks in their investment portfolios if they have broad exposure to the art market or a category within it, such as contemporary art.
The art has also proved its worth as a way to preserve wealth “because it has been so stable,” says Gyorgy. This is especially true for collectors focused only on the best art. But a diverse collection can also produce stable results, she says.
The greatest art story of 2021 was the rise of NFTs, unique digital assets related to works of art that are most often digitally created. These tokens disrupted the art market by creating “a new way to consume art and collectibles” that tapped into a “younger, more digital-native audience,” wrote Anders Petterson, founder and CEO of ArtTactic, in a chapter of the report.
NFTs are easily traded without the use of a middleman, giving them value beyond their aesthetic value, and tokens provide a way to profit from digital artists, Petterson said.
They were also quickly and fully integrated into the traditional art world of auction houses and dealers, who prior to the pandemic were looking for a way to attract younger collectors to the art market. NFTs and the acceleration of online art tools such as virtual galleries have changed fortunes.
“It turns out that Covid and going virtual have made the art market attractive to many people who used to be online,” says Gyorgy.
Auction houses quickly gravitated to NFTs as these sales instantly exposed them to new bidders, creating a new group of customers who could eventually expand into buying physical works of art, Gyorgy says.
“It starts to trigger this desire to collect,” he says.
Another trend that began in 2020 and has since accelerated has been the auction house’s focus on living artists such as Amy Sherald or Jadé Fadojutimi. Until recently, the works of current artists were largely sold only through galleries and other private dealers.
Auction houses have even carved out new sale categories to highlight “ultra-contemporary” work, such as Sotheby’s “The Now” sale and Christie’s 21st century category. They also raised the profile of existing sales with young and emerging artists, Betsy Bickar, Citi’s art consultant, wrote in the report. Phillips, who has long featured these artists, saw sales increase in 2021, she said.
As a result, relationships in the art world are changing. Auction houses, for example, are planning exhibitions with larger, established galleries and retailers like David Zwirner and Jeffrey Dietsch are reaching a new collector base through collaborations with smaller emerging galleries, Bickar said.
Much of the money flowing into the ultra-contemporary sector is driven by collectors from around the world. “Much of the emerging wealth is buying the emerging contemporary,” says Gyorgy.
As with any emerging market, time will tell whether some of the artists making headlines today will have staying power. “If you are buying purely for investment, you will have winnings, but you will have losses,” he says.
A potential hindrance to the market in the coming year could be a rise in global interest rates, which will make it more expensive to borrow an art collection. Furthermore, volatility in the markets could potentially reduce the amount of disposable income that wealthier collectors have to purchase to purchase works of art.
“In recent decades, the art market has also benefited from the growth of the world’s ultra-rich population. More multimillionaires and billionaires represent greater potential demand for expensive works of art, “the report states.” Any turnaround, possibly resulting from a decline in investment portfolio wealth, would likely be detrimental to art. ” .