Artnet’s Spring 2022 Intelligence Report, out in just over a week, will examine what happens when the art market tries to become the stock market. The longstanding conversation about art becoming an asset class accelerated during the pandemic, and Katya Kazakina took a deep dive into the end game of this trend: fractionalized art ownership, a model that lets people invest in shares of an artwork and benefit from a portion of the upside when the work is eventually sold.
While you wait for the full story on the rise of this phenomenon (and trust us, you’ll want to come along for the ride), here is a sneak preview of the dynamics at play.
Last year, the Swiss bank Sygnum attracted more than 60 investors to 4,000 shares of a 1964 painting by Pablo Picasso, Fillette au béret, with each share valued at CHF1,000 ($1,070).
The painting, bought for $3 million in 2016, was listed at CHF4 million ($4.3 million), with investors essentially buying the owner out for a 38 percent profit. But the company gains even more with a onetime management fee of 8.9 percent of the original purchase price, or $89 per token. And if the company sells the painting within five to eight years, it will make an additional 2.5 percent commission.
Meanwhile, the fast-growing fractional art ownership company Masterworks bought about 65 works of art to the tune of more than $300 million last year.
Masterworks adds a roughly 11 percent fee to the purchase price and then offers these works like IPOs, effectively flipping them to investors. The company charges a 1.5 percent annual management fee and earns 20 percent of any profit realized when the works are sold.
The target audience for these schemes is retail investors looking to get rich quick, and the emerging wealth sector—often those enjoying newfound crypto largesse—as opposed to old money or hedge-fund and real-estate millionaires. Those deep pockets can afford to buy artworks outright.
The Sales Pitch:
- It’s safe. Blue-chip art is presented as a low-risk investment and a hedge against inflation.
- It’s cheap. The price to buy in—as little as $20—is accessible to a much larger pool of people than can operate in the traditional art market.
- It’s easy. Blockchain technology means that investors can often use any currency, fiat or crypto, to buy a securitized token representing their stake (and avoid the bureaucratic red tape of traditional funds).
- It’s cool. As Katya puts it, “buzzy NFTs or historic works by Picasso are more exciting to discuss over cocktails than index funds.”
- It’s unpredictable. Despite the hype, investors in art can generally expect lower returns than from other types of investments (like a tech stock or an index fund) because of the art market’s relative volatility, illiquidity, and opacity.
- It’s got a minimal track record. Masterworks has only sold three works from its trove to date—and it has a lot of so-called masterworks left in storage. It’s hard to know whether the gamble will pay off.
- It may not actually work. Michael Moses, an economist who examined 50,000 repeat art sales over the past 50 years, warned that only 0.5 percent of the works returned 100 percent or more. Less than 10 percent of all works returned even a more modest 10 percent compound annual return.
The Bottom Line
Both Sygnum and Masterworks have ambitions to scale up, with the Swiss bank pitching tokenized artworks to conservative money managers and banks, and Masterworks reportedly approaching major investment banks about adding fractional art to their diversified offerings to clients.
But without a solid track record or traders with the requisite art-market expertise, fractional art sales are likely to remain a hard sell to large financial institutions.
For now, these schemes are most attractive to a mass audience interested in buying into a formerly inaccessible market and spinning a profit. To some, it may sound like a Robin Hood scenario, but it’s important to ask: who is actually winning? With large financial institutions still out of the game, these companies depend on the buy-in of the (relatively) little guy, who could conceivably be making a smarter investment choice. So why aren’t these vital investors demanding a larger slice of the upside?
In the latest Wet Paint, we learned that the Belgian painter of moody landscapes, Harold Ancart, has parted ways with mega-gallery David Zwirner, which launched his ascendant star back in 2018.
Meanwhile, if you were thinking something was rotten in the state of New York the other day, that might be because an anonymous art duo unleashed a stink bomb at the VIP opening of the Whitney Biennial to ruffle the feathers (and wrinkle the noses) of the downtown establishment.
Here’s what else made a mark around the industry since last Friday morning…
- Art Basel and UBS released their 2021 art market report, which found that fairs are—very slowly—bouncing back from the pandemic. These events accounted for 29 percent of gallery sales in 2021, per the report, despite ongoing travel restrictions and cancellations. That’s up seven points from 2020, but still a far cry from fairs’ pre-pandemic 43 percent share of gallery sales. (Artnet News)
- The second edition of Vienna‘s pandemic-devised Spark Art Fair closed over the weekend, with 80 galleries showing just one artist from their program and sharing booths among four at a cost of €4,500 ($5,000). Galerie Kandlhofer sold out its presentation of works by Alexander Basil priced between €1,500 and €7,500 ($1,700–$8,300). (Monopol)
- Christie’s won a big consignment this week: the collection of Anne Bass, who died in 2020. Her daughters are selling a dozen of her 19th- and 20th-century treasures this May for an estimated $250 million. The collection will go head to head with Sotheby’s second Macklowe offering, which is estimated to generate $300 million. (Financial Times)
- Germany’s biggest auction house, Ketterer Kunst, will no longer conduct business with clients in Russia in light of the ongoing war in Ukraine. (Press release)
- Sotheby’s tapped Daniel Asmar as managing director for the Middle East and North Africa. Asmar, who was previously in the financial sector, will be based in Dubai. (ARTnews)
- Venus Over Manhattan is opening a second New York space with a focus on the red-hot emerging art sector. The downtown outpost (55 Great Jones Street) debuts April 7 with a solo show by buzzy painter Ana Benaroya, whose prices range from $12,000 to $50,000. (Artnet News)
- Pilar Corrias has taken on the up-and-coming Montreal-based artist Manuel Mathieu, and will debut his new body of work on April 28. Born in 1986 and raised in Haiti, Mathieu explores his cultural roots and migration experience through a range of media. (Press release)
- The Talking Galleries symposium will gather nearly 50 industry insiders—including your very own Andrew Goldstein, Tim Schneider, and Julia Halperin—in New York on April 4 and 5 to discuss the most pressing issues facing the global art world today. Artnet News Pro subscribers have exclusive access to the livestream of the symposium. (Artnet News)
- The Baltimore Museum of Art has announced that Christine Dietze, the institution’s COO, and Asma Naeem, its chief curator, will serve as interim co-directors following the departure of Christopher Bedford on June 3. Bedford is heading West to lead the San Francisco Museum of Modern Art. (Press release)
- Unionized Whitney Museum workers seized the limelight at the VIP opening of the museum’s biennial on Tuesday, demanding job security guarantees, affordable health coverage, and a living wage in their new contract. Negotiations between the union and museum have been underway for nine months. (Artnet News)
- The British Museum is the latest institution to cut ties with the Sackler family. It will rename spaces and endowments that currently honor Raymond and Beverly Sackler to help “move the museum into a new era,” per chairman George Osborne. (Artnet News)
NFTs and More
- Jeff Koons is unleashing his first NFT collection with Pace Verso. The project, titled “Moon Phases,” pairs physical sculptures with unique digital works. Later this year, a private space company will send a group of the sculptures to the surface of the moon, where they will remain in perpetuity. (Don’t ask about the project’s carbon footprint.) (Artnet News)
- Carroll Dunham, Ludovic Nkoth, and Alteronce Gumby are among the investors in Fairchain, a new blockchain-based title management and transaction service from entrepreneurs Max Kendrick and Charlie Jarvis. The tool attaches a digital contract to an artwork that guarantees a royalty of up to 10 percent each time it changes hands. (Artnet News)
- Gagosian—whose eponymous founder has been notoriously circumspect about NFTs and crypto—will now accept Bitcoin, Ether, and USD Coin as payment for art through a partnership with the exchange platform Coinbase. (Artnet News)
Clicks vs Bricks
It’s no secret that the pandemic made buyers, sellers, and auction houses all more comfortable with the idea of transacting online.
Two years post-lockdown, many in-person art events and auctions have returned. Are people still buying as much art online? Julia Halperin investigated.
- Online sales are indeed still growing. In 2021, more than $1.5 billion worth of art was sold online at Sotheby’s, Phillips, Christie’s, Bonhams, and Artnet Auctions, representing a 35 percent jump year over year, and a whopping 12-fold increase since 2019.
- The quantity of art sold online is up. A total of 27,215 works were sold online at the houses we examined last year—up 17 percent year over year.
- People are buying more expensive art online. In 2019, the average price of an artwork sold online was $11,228. In 2020, that figure jumped to $46,595, and remained on an upward trajectory, rising 15 percent in 2021, to $53,685. The overall shift in just two years amounts to quadruple the metric in 2019.
For the full download, including which of the Big Three houses is the reigning champ in the online space, click through below.
“I know this is shocking, but this project is coming to an end. I never intended to keep the project going, and I don’t have a plan for anything in the future.”
—Discord user Jakefiftyeight, aka Ethan Vinh Nguyen, on pulling the rug out from under investors in Frosties, the NFT collection he launched with Andre Marcus Quiddaoen Llacuna. Less than an hour after their 8,888 ice cream cartoon characters sold out, they transferred $1.1 million in proceeds to their own crypto wallets and shut down the project. They’ve since been arrested on charges of conspiracy to commit wire fraud and money laundering. (Artnet News)
Artwork of the Week
Claude Monet’s Le Grand Canal et Santa Maria della Salute
Seller: Descendant of a private collector, Europe
Estimate: In the region of $50 million
Selling at: Sotheby’s Modern Evening Auction in New York
Sale Date: May 17
With the art world’s eyes trained on Venice ahead of the Biennale, what better time to offer a prize Monet vista of the city? The artist only visited La Serenissima once—though he was prolific during the three months he was there, capturing the city in 37 paintings, among them this luminescent depiction of the grand canal with the Santa Maria della Salute church in the background.
Sotheby’s says its hefty estimate is in line with the $50.8 million result achieved for Monet’s 1918 Coin du bassin aux nymphéas at the house last November, or the $70.4 million netted by Le Bassin aux nymphéas (1917–19) in May 2021.
While Le Grand Canal may be the most expensive, it is not the only Monet appearing in the house’s marquee May sales in New York. The artist’s Les Demoiselles de Giverny (1894), consigned by Washington Commanders owner Dan Snyder, is also being offered stateside after an eleventh-hour withdrawal from the house’s spring sale in London. The results of that evening, marketed by the house as “raining Monet,” don’t bode particularly well. Snyder’s four other Monets drew tepid prices; one failed to sell entirely.
A striking water lily painting consigned by the family of a Japanese collector did fetch an above-estimate £23.2 million in London, which proves that good examples—particularly of the water lily motif—are still attracting demand. But the fuller picture suggests that, much like the acqua alta posing a perennial threat to Venice, the market could be a little flooded with Monet.