George Lucas not only has an art collection worth around $600 million, including paintings by Edgar Degas and Pierre Auguste Renoir, but he also invested $1 billion in the Lucas Museum of Narrative Art in San Francisco, which houses famous paintings, Star Wars memorabilia, and unpublished photographs.
Madonna’s art collection, on the other hand, is valued at over $100 million, featuring works by renowned artists such as Frida Kahlo and Pablo Picasso. In the same vein, Leonardo DiCaprio’s artistic wealth is estimated at approximately $260 million, while David and Victoria Beckham’s art collection is appraised at 40 million pounds. The former footballer and the former Spice Girl proudly showcase pieces by provocative and cutting-edge artists like Damian Hirst, Banksy, and Tracey Emin.
Similar to these mega-celebrities, individuals within the financial industry have increasingly recognized, particularly in the wake of the pandemic, the resilience of the art market and its significance as a “fortress” and diversification asset. Furthermore, the inherent pleasure of possessing a distinctive and aesthetically captivating, if not attention-grabbing, object adds to the appeal of art investments.
Just like any investment, the art market is not impervious to economic fluctuations. Therefore, one of the crucial factors in maximizing returns in this realm is access to information. Not only must you possess the knowledge to assess the current value and future potential of artworks, but you also need to master the distinctive intricacies of this specialized domain.
In the world of art investment, there’s a general principle that the higher the quality of the artwork, the lower the risk, as established artists’ names tend to be safe havens. However, when investing in an emerging artist, there’s typically a higher short-term risk involved. Nevertheless, if the young talent successfully establishes themselves in the market, it can yield substantial profits in the long run.
Indeed, artworks often have a tendency to appreciate in value over time rather than depreciate. A notable example of this is Pablo Picasso’s painting “Femme assise près d’une fenêtre (Marie-Thérèse),” which originally sold for $6.8 million in 1997. Sixteen years later, it reappeared on the market and was auctioned at Sotheby’s in London for $44.7 million. Remarkably, its journey didn’t conclude there; in May 2021, it was once again auctioned, this time at Christie’s in New York, fetching an astounding $103.4 million. This remarkable price evolution highlights the potential for significant appreciation in the art market.
Another compelling example of the art market’s stability in recent decades occurred in May 2009. Just five months after Lehman Brothers declared bankruptcy during the financial crisis, the art collection of French designer Yves Saint-Laurent, comprising over 700 pieces, set a historic record as the most expensive ever sold, fetching a total of $483.8 million. Remarkably, this milestone has remained unsurpassed to this day, underscoring the resilience and enduring value of fine art even in challenging economic times.
The Fractional Ownership Trend
According to experts, it’s wise to regard art as a supplementary component of a diversified investment portfolio, with a focus on medium- to long-term returns. Art’s attractiveness stems from its relative immunity to inflation spikes and the high volatility often observed in global stock markets. Moreover, art possesses intrinsic value that transcends currency fluctuations, making it an appealing choice for investors. Financial experts categorize art as “non-cyclical,” as its value isn’t significantly influenced by macroeconomic events, in contrast to investments like fixed-income and equities that can be greatly impacted by such factors.
Another appealing aspect of investing in art is that in many countries, such as Spain, there are tax incentives that can enable investors to defer or potentially avoid paying capital gains tax on the appreciation of the artwork
All these reasons have led art to even outperform gold as an investment instrument, despite investing in the precious metal still being more predictable and stable.
Choosing art involves more than just acquiring paintings, furniture, manuscripts, ceramics, sculptures, or photographs. It also includes buying shares in companies like auction houses Sotheby’s and Christie’s or investing in art funds dedicated to buying and selling art. Likewise, crowdfunding, which involves collective project financing, is an interesting yet somewhat risky way to invest while supporting projects by young and relatively unknown artists.
For those with fewer resources to invest, companies like Masterworks now offer options to broaden access to art as an investment. The process is straightforward: on the company’s website, there is a wide variety of available artworks, and with contributions ranging from $500 to thousands of dollars, anyone can own a portion of a specific painting
Fractional ownership offers an opportunity for individuals with a smaller budget to participate in a market that was previously accessible only to the super-rich. It is part of a new trend in the market known as the ‘democratization of luxury.
Furthermore, Masterworks lends these artworks to museums for public viewing, and this innovative approach has attracted over 10,000 new investors who have collectively contributed more than $30 million.
High-value art isn’t merely an investment; it’s also a means to gain global influence and prestige. This was exemplified by Saudi Arabian Prince Mohammed Bin Salman in 2017 when he acquired Leonardo Da Vinci’s “Salvator Mundi” for $450 million. To this day, the whereabouts of the painting remain uncertain, with the Saudis announcing that it will only be publicly exhibited in 2024. This underscores the fact that, shielded by his immense wealth, Bin Salman can exert complete control over one of the most expensive paintings in the world of art.
