The art market isn’t just for the ultra-wealthy anymore

In recent years the art market has seen a remarkable transformation drawing a new wave of professional financial investors; moving into the art market as an outright yield play with the added benefits of diversification and non-correlation. 9to5 Live's Mark Williams delves into the current state of the art market and its evolving demographics with Emilia De Stasio, co-founder of Artscapy. She sheds light on the resilience of the art market amid economic uncertainties, the financial benefits of art investment and emerging trends. You can watch the whole conversation here or read their conversation below. Keep your eyes peeled as we will have a monthly conversation with Mark on the evolution of the art market, the latest auction results, themes coming to the front and more.

Mark Williams: 

Hello and welcome to another edition of 9to5 Live. The art market has always attracted the rich and the famous, but most recently, professional financial investors have stepped into the market. They see it as an asset class in itself. What is the current state of the art market and who is buying? Here to tell us is Emilia De Stasio the founder of Artscapy in London. 

I'm going to ask first of all to introduce yourself. And then Artscapy.

Emilia De Stasio: 

Before I get into what Artscapy is, here’s a quick background of myself. I'm myself an art investor. I've been investing in contemporary art for about 15 years at this point. And professionally, I come from financial services and investment. I've always been looking at different asset classes, particularly interested in the alternative investment space. Before founding Artscapy I was an investment manager at a family office, managing their alternative asset portfolio, both in terms of tech startups, but also art and other alternative assets. And before that, I've been a market researcher, both at the European Central Bank and in private sector, at Moody's and other institutions and I'm a CFA charter holder. And those are just some of the aspects that I bring into Artscapy.

So now if we look at what Artscapy is, what it really is, is an alternative investment platform that's specialises into art. It’s the idea of bringing art as an asset class to more investors, whether you're novice or experienced. It's really an end to end portfolio management system. Imagine a bank account for art as an asset, from the digital portfolio management through to unbiased acquisitions finding the next good deals to invest in and building that portfolio through to managing it. Insurance, valuations, understanding and tracking the value of the artwork storage and so forth through to the liquidity aspect. This includes art financing, private brokerage and selling through auction. We've put it all together in one platform that is Artscapy.

Mark Williams: 

Could you discuss with us, could you explain to us the current state of the art market now?

Emilia De Stasio: 

With the macro economy being what it is now, where we do have some geopolitical tensions; we have interest rates that are relatively higher than what we've been used to for the past almost two decades. Obviously the art market isn't immune to that, but the art market has been extremely resilient.

The art market continues to grow and we see new entrants into the art market. And why is that? I think it's interesting to think about art as an asset class because it has a lot of benefits. So purely from a financial standpoint, you're looking at an asset class that has strong return potential. In general, what we see in our clients is returns around 20 % per year, which is very strong and beats a lot of other asset classes. Of course, what underlies that is not all art is created equal. They don't all perform the same. This idea of selecting which assets you invest in is really the same as thinking about the stock market. You have an average increase of the market, right? But then, if you're good at selecting what stocks to invest in, you're going to perform better. The same principles apply to art.

It's really interesting also this idea of how some of the classic financial or wealth management principles can be carried into art. So we've talked about the return potential. You then have the diversification or the uncorrelatedness of art. It's almost near zero correlation with a lot of other asset classes from equities through to property, through to fixed income and so forth.

And finally, you have the downside protection as well. Compared to a lot of other asset classes, even when things go bad, they go less bad on aggregate than other asset classes, which I also think has been really, really interesting.

And then finally, the thing that I personally like a lot about art as an asset class is this idea of it being probably the only asset that has the potential to yield twice. You have the financial yield potential, which is great, but you also have the, let me say the mental or the emotional benefit of owning and living with art. It's an asset class that you can enjoy while it's rising in value, which you can't really say for a lot of other assets. I mean, investing in stocks doesn't really give you personal pleasure. Investing in wine is nice, but if you drink it, it's gone. This is the only asset that you can actually enjoy and live with while it is appreciating in value.

Mark Williams: 

Can you, what kind of clients are being, what kind of new entrants are coming into the market to start looking at art as an asset class?

Emilia De Stasio: 

I was mentioning these financial benefits have not really have not gone unnoticed. If you look at the private banks, from your Deutsche, UBS and so forth, they've always had corporate collections and active investment into the art market. I don't think it's gone unnoticed and it's certainly rising more to the surface now in the investor community.

It's also an interesting one in general, what we're seeing among individuals. People who are coming from higher disposable income, looking for ways to diversify their wealth, also investing in a socially conscious manner. What I also like about art is that by buying art and particularly living artists, you're actively supporting cultural production. You're actively supporting another area of society really.

Those are some of the attractive points, but then I think in general it’s these three, four financial pillars that are pulling a lot of people in. If you look at a lot of asset classes, they have their own price entry barriers, investing into property, cars, et cetera. They have quite high price entry points, but with art, you can start to build a portfolio at a much earlier stage and still build something that has value and continues to increase in value over time. And that's really drawn in a lot of people. In the UK, which is our home market and where I'm based, you see that over 50% of people who are earning £60K a year, which is in the range of mid-career, early stage managers and the likes, and you see over 50% of them bought art last year as a way to diversify their wealth. And if we look among high net worth individuals, over 70% are buying art to diversify their wealth. So it's really much more common than most people think. And I really think it comes down to some of these financial and also non-financial benefits.

Mark Williams: 

Are there any themes? What are the themes that are coming out in the art market? What is fashionable? What is popular? Is there such a thing at the moment in the contemporary art world?

Emilia De Stasio: 

Yes. There are a couple of themes that are interesting here. So one point is the general interest in contemporary art. If you look at where the volume of the market is, where you have the most liquidity, the most trading is in contemporary artworks and less so old masters and classical works.

In terms of topical areas right now, we see coming out of the Venice Biennale, for instance an interest in South American artists and particularly in themes like migration, globalisation, climate change playing out right now, as well as at Art Basel going on now in Switzerland. Those are just some of the most important themes. It's both a thematics and geographic focus.

The interest in looking in African artists, which has been quite hot, let me say, since the past couple of years, continues to be there. But I also see some early indications of saturation in the sense that you need to be a bit cautious of which African artist you look at, at which stage he or she is at.

Which brings me to another interesting point, which is this idea that we're trying to infuse into Artscapy is thinking about the various drivers that drive the value of art. Because a lot of people will say, “but isn't it all just subjective and you just buy what you like” and then you think or hope that that's going to rise in value. What's interesting and what we're bringing now into all of our advisory and the way we look at art at Artscapy is bringing out the objective markers of what drives value in an artist or an artwork. That includes things like, has the artist been in important institutional collections? So say MoMA, the Tate, Royal Academy and so forth. Has he or she shown at important exhibitions, alone, in a group, et cetera?

And notice that in all of those things, I have not even mentioned what the artwork is, right? I have all these markers that are totally independent from the artwork itself, whether or not “it looks nice.” I have a lot of markers that help me understand whether there's value in it. A lot of those things we tried to bring in, and we're going to be launching sort of a rating system soon, to help users understand what are some of the liquidity, risk and tradeability aspects of art. Not to necessarily commoditize the asset because there is obviously a lot of taste making and cultural themes in it, but to help to give traders or investors an understanding, right? And also untangle what drives value in the art market.

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