contemporary art as a haven asset and why the market holds on between pandemic and war
The most expensive contemporary artwork ever: a $ 195 million Warhol was auctioned. The sector returned above pre-pandemic levels in 2021 and over the past 25 years has offered better return than large cap stocks
The outbreak of war between Russia and Ukraine has had an impact on several fronts in the art world. The images spread all over the world have shown the commitment of Ukrainians to protect the monuments and public cultural assets on their territory. Furthermore, besides the sanctions of the West against Russian artists and buyers of luxury goods, skirmishes occurred between cultural institutions and eminent personalities from the sector in Russia handed their resignations. Banksy’s Mona Lisa, depicted in two stencils in which Leonardo da Vinci’s best-known subject is reproduced with a red target on the forehead or a bazooka on his shoulder, risks becoming an icon of the moment crossed by Art.
Yet, despite the tense atmosphere induced by the conflict and uncertainties about the post-pandemic recovery, the auctioning of the most expensive 20th-century artwork ever has taken place in recent weeks. Shot Sage Blue Marilyn, a pop-art screen-print made by Andy Warhol in 1964, was sold by the gallery owner Larry Gagosian for $ 195 million at the end of a less than four-minute bidding battle at Christie’s in New York on May 10th. A surprising result only for the layman: the auction house had forecast 200 million dollars as the maximum of the starting estimate.
It must be said that the proceeds would have been donated to charity but, to understand how the event fits into the historical moment, it may be useful to consider two aspects: the economic situation crossed by the art market and the value of the same, especially the contemporary one, as a haven asset.
After the biggest recession in ten years, which occurred in 2020, the industry made a strong recovery in 2021, according to the latest annual Art Basel report . Aggregate sales of art and antiques by merchants and auction houses reached an estimated $ 65.1 billion, up 29% from 2020 and surpassing 2019 pre-pandemic levels, when the art market had reached $ 64.4 billion, then went slightly down (-5%). Moreover, it was the auction houses that experienced the greatest growth (+ 47%), mainly driven by a small number of works of art mediated by a small circle of high-level merchants.
To this must be added another long-standing factor: the high yield of contemporary art, which even exceeds the stock index of the 500 largest capitalization companies listed in New York. Investing in this kind of artwork, i.e. those made from 1945 onwards, has offered an annual return of 14% over the last 25 years , according to an estimate by the Citi Global Art Market Chart , which largely exceeds the S&P 500 index that “stops” at 9.5%.
Of course, it should be remembered that art is a difficult asset to make liquid and that it is necessary to be well assisted to choose the right work to invest in, but this type of asset offers numerous benefits. In the last quarter of a century contemporary art has recorded losses in only 4% of cases, over a three-year period of investment, while the S&P 500 index and the stock market have ended up in the red in 24% of cases, the real estate sector American incurred losses in 20% of cases and gold in 40%, according to a Mirabaud analysis.
Furthermore, art has a low correlation to other traditional investments, which makes it less vulnerable to market fluctuations and therefore safer in the face of inflation risk. All clues that reconstruct the identikit of a safe haven asset.
“The war has unfortunately exercised a positive influence, because historically when the stock market goes down, the art market goes up – explained Mariolina Bassetti , president of the Christie’s Italia auction house at the end of March -. This is because art represents an alternative safe haven asset that investors are happy to turn to. The London auctions that took place during the first week of the war went extremely well “. The expert then added an analysis of the market: “The most profitable data is the impressionist, modern, post war and contemporary market” and the historical period, “that is the last century and a half which confers a superior value to the visual arts compared to the other sectors. The two-year period 2020-2022 is proceeding very well for the market and no downturns are expected “.
Contemporary art does not only require the advice of an art critic, to meet “the investment”. As an asset destined to revalue itself on figures within the reach of a restricted market if not of the elite, adequate and “tailor-made” forms of protection are necessary. From theft to damage to counterfeiting, there are numerous risks associated with these assets whose life cycle takes on a historical breath. The appraisals, in these cases, require the presence of a staff with years of experience in the insurance market, professionals accustomed to working for decades at high levels in relations with institutions and managers of great wealth, both in the settlement of the damage and in the recruitment phase risk.