Art Market Returns Rivaled Bond Investment Gains for over 30 Years

There are several investment opportunities popular all over the world and as time goes on, trends seem to always change. For many years, the stock market has been the most popular and also one of the most lucrative especially in the U.S. as records show that the S&P 500 has gained more than 180% in the last ten years. However, another investment channel that doesn’t seem to be talked about much but pulls in mouth-watering rewards, is the art market.

A recent Citi report which was put together using information from blue-chip art investment platform Masterworks.io has brought to light the fact that on average, art investment has pulled in annual returns of 5.3% for more than 30 years, since 1985. Specifics for the same period suggest that impressionist art has achieved 5.0% while contemporary art boasts of an annual 7.5% average. For comparison, bonds from most of the world’s most stable regions pulled in 6.5% with the high-yield versions pulling 8.1% since 1985 as well. Also, Swiss investment banking and financial services company UBS valued the art market at $67.4 billion in 2018.

Back in 2017, the “Salvator Mundi” by Leonardo da Vinci was sold for a whopping $450.3 million. In 2018, the “Young Girl with a Flower Basket” painting by Picasso and the “Nu couche” by Amedeo Modigliani, both sold for $115 million and $157 million respectively. For 2019, the “Meules” painting from the “Haystacks” collection by Claude Monet was auctioned a few months ago in May, for $110.7 million.

The bigger problem with art investment might not be that investors are unaware of how lucrative it is. Even people who know these numbers still have to fight the fact that art investment is capital-intensive and only financially available to the tiny percentage of wealthy people. However, even though art is generally expensive, there is also a category with works that sell for $50,000 and sometimes less. Citi believes that this category might be more beneficial as “there is no disadvantage from a return perspective to having a small purse.”

There’s also the volatility to grapple with. Most investment channels have some level of volatility but with art, things might be a bit shakier. However, the class of investors that can afford it are slowly becoming more willing to put big bucks in this market as they have realized how lucrative it is, especially in the long term. It is also a great addition to investors who want some diversification.

The volatility of the art market could stem from the fact that it is almost entirely based on perception and preferences among consumers. However, this can be considered a good thing because it would mean that many factors that seem to generally cause other markets to nosedive are unlikely to affect the art market, lending it some level of stability.

If there was some way to spread out the heavy cost of entering the art market, it could prove in the long run, to even be more stable and attractive than bonds, and probably other channels as well. The U.S. market has dominated international stocks for at least ten years now. However, this is expected to turn around from next year because all of the other non-performing regions are waking up slowly.