Investing successfully in art – art as an investment

1. The global art market – An overview in figures

The global art market essentially consists of the primary market – for artworks sold for the first time – and the secondary market for resales. The global art market was valued at US$50 billion , declining by approximately US$14 billion compared to the previous year due to the impact of the coronavirus (COVID-19) pandemic.

This decline is also reflected in the volume of global art sales 31 million transactions in 2020 , compared to over 40 million in 2019. However, as the pandemic forced auction houses and art dealers to strengthen their digital departments, overall sales increased. The online art and antiques market doubled in 2020 compared to the previous year (source: Statista )

2. Art as an Investment – ​​Fundamentals and Characteristics

Investing in art goes far beyond simply finding that pretty watercolor for your dining room and vaguely hoping that it will increase significantly in value over time.

Art can take an important place in your investment portfolio, as it acts as a hedge against inflation, increases diversification, and reduces the volatility of your portfolio.

Many investors unfairly assume they are excluded from the art market, viewing art as an investment exclusively for the ultra-wealthy. Consequently, most private investors do not own art as an alternative asset class to traditional investments .

Furthermore, the outbreak of the coronavirus pandemic posed a challenge for the art market.

“Art as an asset class is generally underinvested because investors have limited access to the highest quality works ,” comments Cynthia Sachs, CEO and Chief Investment Officer at Athena Art Finance Corp.

Besides the traditional art purchases of old masters like Claude Monet , for which seven- to eight-figure sums sometimes have to be set aside, many alternative investment opportunities have developed over the years for investors of all budgets.

Participation in the art market and its profits is therefore no longer a question of available budget. Although 2020 was a difficult year for the traditional art market, online sales a record $12.4 billion , double the amount in 2019.

Given the growing art market and the proliferation of platforms that offer an entry point into this investment, you may be curious about how you yourself can benefit from the market dynamics of this alternative asset class.

As mentioned at the beginning of this chapter, art can fulfill many functions within an investment portfolio. This makes it an attractive asset for private investors.

2.1. Art as investment diversification

Firstly, art can act as a portfolio diversifier. By allocating a portion of your portfolio to this asset, you reduce your risk by spreading your money across different investments.

A key factor here is that art is an asset class that is not correlated with other major stock market assets. This means that if equity-based assets like stocks or bonds perform poorly, alternative investments such as art tend to maintain their market value. Thus, including art in a portfolio acts as a kind of hedge against a bear market or an economic crisis.

2.2. Art as a long-term store of wealth

Experts say that art as an investment can also be a way for investors to preserve their wealth. Art serves as an effective hedge against inflation and thus maintains its value over time.

Artwork is a physical asset, and physical assets tend to perform well during inflationary periods. Since we are currently experiencing an inflationary phase in our macroeconomic cycle, art can be a very good hedge against inflation.

2.3. Low volatility

Although every investment carries a risk, one of the advantages of art is that it is not an asset that is heavily affected by market volatility.

Unlike stocks, which are sensitive to market movements, the art market has grown steadily over the years, and traditional physical art tends to maintain or increase its value over time.

You won't experience the same volatility in the art market as in the stock market because the blue-chip art market offers rare, desirable assets. Therefore, art will continue to have some support even during negative market news.

2.4. Liquidity Risk

However, these benefits can backfire. One of the risks of art investments is the difficulty of liquidity. If you want to sell a physical work of art, do so through an art gallery , auction house , or art collector. This can be a time-consuming process.

Since art is not a frequently bought and sold asset, it carries a liquidity risk that is not present in the stock market. This makes art more of a buy-and-hold asset class.

3. How do investments in art work?

We've learned that while the art market does, to a certain extent, follow the market mechanisms of supply and demand, it develops independently of general economic markets, as reflected in stock exchanges. It follows its own rules.

In principle, however, art, like stocks and bonds, can also increase in value . If an up-and-coming artist embarks on a successful career, the cash value of their work will skyrocket. The same applies to deceased or long-established artists when their perception and evaluation by art experts, critics, and collectors fundamentally changes.

When the value of a work of art increases, it usually does so through a small number of traditional, surprisingly predictable channels: art dealers persuading their wealthy clients to spend more; auction houses enticing wealthy collectors to bid higher; wealthy collectors buying and selling art to each other; and finally, through an ecosystem of curators, experts, galleries, critics, and influencers who contribute in some way to the perception of value.

3.1. There is no single art market

One work may be .

For example, the demand for Ming vases is not comparable to the market for mid-century sculptures, and the added value in the Old Masters market is far removed from that of French Impressionism .

Therefore, before you look at a property and decide that it is a great deal, make sure you base this assumption on the sale of suitable, similar properties.

Generally, new collectors tend to be interested in paintings, simply because they are the most obvious and accessible choice. However, you shouldn't overlook excellent photographs, prints, watercolors, and etchings either.

Galleries tend to focus on artworks from the 20th and 21st centuries.

In reality, as a potential art investor, you have works from 7,000 years of art history to choose from.

4. What you should know before investing in art

4.1. Art is a long-term form of investment

Profits from the sale of artworks that have increased in value won't be realized overnight. Experts therefore recommend art investments primarily for patient investors with a time horizon of 10 years or more. When it comes to art, it's best to think long-term.

Many art investors include paintings in their estate planning to pass them on to their heirs.

4.2. There is no guarantee – risk of loss exists

Every work of art is unique, and the art market has its ups and downs like any other market . Unsurprisingly, this form of investment also carries a certain degree of risk.

Since it is impossible to determine the true value of a work of art precisely, even for recognized experts – much depends on the artist's reputation, the overall market, but also on many individual and personal factors – you should always be aware that you are always taking a certain risk when buying art. This cannot be completely avoided.

Even art world insiders are just as often wrong as analysts predicting the price of gold. No artist, no matter how popular they may be, is a sure thing.

Buying art is not a guaranteed profit, even if the artist's works are located in the living rooms, salons and lofts of renowned collectors, are part of the world's best museum collections, or are showered with praise by glowing reviews in the press.

Have you ever heard of Robert Yarber, whose work the late New York Times critic John Russell described as "undeniably compelling" and whose art is part of the Whitney Museum's permanent collection? No? Then you're like most people. Notice anything?

Or could you have predicted that Fernando Botero – the second most successful living artist at auction in 1993 – would soon be overshadowed by Jeff Koons?

Or that the market for works by Jeff Koons would also come to a standstill as a consequence?

However, unlike other forms of investment, regardless of any changes in value, you will still own a wonderful work of art that, in addition to its quantifiable cash value, will always have an intangible value and will continue to allow you to use it to enhance your living room.

4.3. Art should only make up a small part of your portfolio

If you are not just interested in art as a hobby, but consider buying it a serious investment, then you should definitely heed this advice.

For most long-term investors, art will only make up a small fraction of a well-rounded investment portfolio. You can profit, the risk is manageable, but it's very unlikely that you'll generate a significant and secure return from art alone.

Think of it like a real estate investment, which serves as a useful complement, but isn't essential. Don't rely on an art investment alone to generate a stable income .

4.4. Limited liquidity

We've already touched on this topic. However, it's important to remind you again at this point that art is not an easily liquidated asset; rather, it's an illiquid asset. This means it's difficult to immediately convert an object into cash.

Liquid assets such as stocks, bonds, and money market accounts can be converted into cash more easily and, above all, much faster. Illiquid assets such as real estate and art take much longer to sell, even if they have a high paper value. Finding a suitable buyer also takes time.

Although it is certainly possible to sell artworks, most investors do so quite rarely. An auction house, the best choice for selling, often charges high fees. Since art prices fluctuate regularly, there is no guarantee that a sale will yield a profit. Therefore, holding periods are often 10 years or more. Art, therefore, tends to be a store of wealth and a long-term investment.

5. Investment types and investment strategies

There are various ways and approaches to invest in art. Each has a different risk and return potential.

5.1. High risk and high price

You can buy original works at auctions, galleries, and art fairs ; however, this comes with the highest price and the highest risk. You can also try to buy works by an emerging but still relatively unknown artist, hoping to discover the next Banksy before anyone else.

If your assessment proves correct, the value of the acquired work should experience meteoric growth. However, the far more likely scenario is that the young artist will soon disappear into the crowd and the attention of the art world will simply move on. In that case, your investment will not have been worthwhile from a monetary perspective.

A unique painting or sculpture could one day be worth much more than you paid for it, or you might have great difficulty reselling it at any given time. The artwork could end up being nothing more than a very expensive home decoration.

5.2. Low risk and low price

Instead of buying an expensive original, you can alternatively choose to buy print of an original painting or drawing

A high-quality, limited-edition print can be very valuable and costs a fraction of the original price. However, since prints are generally not unique, they do not appreciate in value to the same extent as the originals.

The best printing method is known as giclée printing . Pay attention to the edition size. Rarer prints are generally more valuable. A print from a small edition (25 or fewer) has more value and potential for appreciation than a print with several hundred copies. Limited edition works should always be purchased with a certificate of authenticity and numbering.

Limited editions exist for paintings, drawings, lithographs, but also for sculptures and three-dimensional works (so-called multiples ).

Reproductions (also called museum replicas) are mass-produced copies without a limited edition. They are the cheapest option, but they are also the least valuable. You will likely not make a profit from a reproduction. They are primarily purchased by those who, as lovers of an expensive and unaffordable work of art, want to bring a true-to-life copy into their own home.

However, there are also exclusive editions of replicas and reproductions . Even if a replica is no longer in production and only a small number of them were sold, over the decades one or more discerning collectors might become interested in it and be willing to pay a higher price.

5.3. Low risk and high price

You can buy works by “blue chip” artists such as Andy Warhol , Roy Lichtenstein , which generally hold their value better but offer less capital appreciation or upside potential.

Blue-chip artists are those whose values ​​are the most stable and are no longer subject to trends, fads, and speculation.

The important thing to remember is that if you want to purchase individual works of art, you probably want to buy ones that will not only make you wealthier but also happy.

If you invest 10,000 euros in a painting that you consider ugly, simply because you expect its value to increase, then you are missing out on the fun and enjoyment of investing in works of art rather than less aesthetically pleasing assets.

6. How to invest successfully in art – Do's and Don'ts

When you invest in a work of art, you buy it in the expectation that demand for this or similar pieces will grow faster than supply. In this case, the value of the piece increases, and you may be able to sell it at a profit.

If you have now firmly decided to invest some of your available funds in art, then I would like to give you a few helpful tips and pieces of advice. I also want to warn you about pitfalls that could cost you real money.

Tip 1: It's a great advantage if art is something you enjoy

Most art investors start small as collectors. If you enjoy visiting galleries and are already looking for a great piece for your home, turn that appreciation into an asset!

But if you don't like art for its own sake, other investment options might be more suitable.

You don't have to be a collector to invest in art. You can limit your investments to one or two pieces to minimize financial risk.

But knowledge of the art world – or working with someone who has that knowledge – is key if you want to select profitable artworks.

Tip 2: Set a budget

The best way to start is by setting your budget. Decide how much money you are willing to spend on art. It should be an amount you can afford to lose if the artwork depreciates in value. Don't forget to factor in potential storage and maintenance costs as well.

Tip 3: Only invest money that you don't urgently need

This rule basically applies to any type of investment. Welcome all gains, but don't plan your financial future around potential profits.

Money intended for retirement, for example, should be invested in other assets.

Conclusion: Don't invest in art that you cannot afford to lose in the worst-case scenario.

Tip 4: Develop your expertise

Then learn as much as you can about the art world to build essential foundational knowledge and develop a feel for the art market. Visit local galleries and see what they have to offer; talk to curators, who are usually happy to answer your questions. Interacting with other interested visitors can also provide valuable insights.

Art fairs, exhibitions, vernissages and art events are other worthwhile destinations.

Browse websites like Artnet or Artsy , and online auction houses like Sotheby’s , to get a feel for how the market works and what price ranges are reasonable.

Tip 5: Determine (or have determined) the market value

Begin by researching the artist of the work you are considering. Ask yourself the following questions:

• Are any of the artist's works included in renowned museums or famous collections?
• Has the artist received any awards or other recognition for their work?

While emerging artists can be exciting, their reputation may or may not last. This directly impacts the value of a work.

Once a particular artwork or artist catches your eye, you can narrow down your research to see how much a specific piece of art costs. Besides conducting your own online research, you can also use specialized services for artwork appraisals, which of course involves costs.

Art experts turn to the promising smartphone app "FIND ART – SHAZAM FOR ART – REVERSE IMAGE SEARCH ." Like an image search engine, it offers art enthusiasts and potential investors a wealth of details and up-to-date price information. Simply take a photo of the artwork and let the app do the research for you.

Tip 6: Review by an expert

Your next step should be to have the artwork assessed by a professional appraiser to determine its quality.

You should leave the appraisal, evaluation, and reliable valuation of artworks to professionals, as even the smallest details can make the difference.

The provenance, i.e. the origin and history of the former owners, can also play an important role in the valuation.

Qualified providers of valuation reports usually have access to extensive databases and archives to base their results on a solid foundation.

Tip 7: You can afford the maintenance

Art investors can control their assets, which can be a bonus. But you're responsible for keeping the artwork in pristine condition , which means monitoring factors like humidity and sunlight.

If you intend to exhibit or resell the artwork, you must ensure it has retained its original quality. If you choose to store it professionally, you will also incur certain fees.

Add insurance costs and the price of a certificate of authenticity , and your maintenance bill slowly adds up.

Tip 8: Remember to factor in additional costs

It's not always easy to grasp the additional costs right away before you make a purchase, so it's important to consider them well in advance.

The various additional costs to consider when buying and selling artwork include sales tax, transport costs, authentication and appraisal fees , and insurance . You might also want to invest in a nice frame or some other type of exhibition presentation for your artwork.

Tip 9: Buy directly from the artist

Art galleries take a commission of up to 50% on every sale. It's therefore reasonable to ask yourself whether you can save money by buying directly from the artist.

However, you must keep in mind that when a gallery adds an artist to its “stable,” it often commits to working with that artist long-term, providing her with money to produce artworks, investing heavily in promoting her exhibitions, and even paying for her work to be shown in exhibitions and museums.

The artist, in turn, often commits to this gallery for the same reasons. If she has a good relationship with her galleries, she will likely not be open to selling behind the back of her trusted gallerist.

Nevertheless, contacting the artist can be worthwhile. As they say, asking questions costs nothing.

Tip 10: Buy second-hand

When you buy a newly created work of art, there's a good chance it was created by someone who is doing their best to make a living from their art. Consequently, the cost of that creator's living expenses (not to mention the cost of materials) is included in the price, which is why even paintings on the walls of simple cafes can cost thousands of euros.

The easiest way to circumvent this? Buy a painting that has already been bought and resold, and reduce the price by at least some of it . Perhaps a work of art is being sold below its purchase price because the owner needs money in the short term.

Check out smaller auction houses , which you can find through websites like Invaluable.com and LiveAuctioneers.com ; you'll still pay a buyer's premium, but the art itself is often comparatively inexpensive. Catawiki a recommended German resource for art auctions .

Tip 11: Specifically look for blind spots

The art market has prejudices that have nothing to do with purely artistic value. Paintings by the Flemish Baroque artist Peter Paul Rubens can sell for tens of millions of euros; his drawings often sell for a fraction of that.

the 20th-century Swiss artist Alberto Giacometti Bloomberg report , while his paintings fetch considerably less. Last year, a portrait of his brother Diego sold for $1.6 million. Practically pocket change!

It's important to remember that these preconceptions aren't set in stone and often change as quickly as fashion. So, if an artist's early work is currently selling at a premium, consider looking at her later pieces instead.

More generally speaking, if a particular artistic period is currently receiving little attention or is even suddenly undesirable, there is a good chance that it will come back into fashion in a few years.

Just because something is very old doesn't mean it has to be prohibitively expensive. A 2,600-year-old Etruscan lion figurine sold for £10,000 at a Sotheby's auction last year. At the same sale, a 2,300-year-old gold torque (a stiff necklace) sold for £11,250, or about $1,000 less than a new 18-karat gold Maker's necklace at Tiffany.

A gold figurine that is thousands of years old sometimes costs less than if it were melted down and sold as ingots.

Tip 12: Buy art online

Since we are living in the information age and digitization is one of the megatrends of our time, artworks are increasingly being sold online, and now in large numbers.

It is inherent in the nature of the internet that costs are saved through this sales channel and thus passed on to art buyers in the form of lower prices – also due to high competition.

So be sure to keep an eye out online for works to add to your collection.

But before you buy online, make absolutely sure that you are buying from a reputable gallery, a trusted dealer, or an established auction house.

In addition to a look at the imprint, press reports, mentions on large, reputable news platforms and trust seals can also provide information about the trustworthiness of a provider.

A detailed guide to buying art online can be found here: Buying artworks online – 10 essential tips for your art purchase online

Tip 13: Check the price history

As the saying goes, "The trend is your friend ." Following this logic, it should therefore be promising to closely examine the price development of works or artists in the past.

In German-speaking countries, you can look at the price histories of artists such as Gerhard Richter , Anselm Kiefer , and Andreas Gursky . The prices of their works rise from auction to auction.

Another helpful indicator for price trends in the art market Mei Moses Fine Art Index , developed by the two New York professors Jianping Mei and Michael Moses . This index compares the original selling prices of specific artworks (mostly paintings) with the subsequent proceeds achieved at auction houses such as Christie's or Sotheby's. The result is a continuous price measurement.

7. How do you properly evaluate art investment opportunities?

Art is a multifaceted market. Therefore, experts believe it is essential to have a good understanding of artists, their markets, and how art is handled.

It's helpful to familiarize yourself with a favorite artist, their career, and their biography. This way, you can see how their brand has grown and whether this growth is sustainable and likely to continue.

As you conduct your due diligence (a thorough, qualitative, and data-based review), you should focus on artworks that have been traded multiple times. This way, you can see if you can identify clear patterns or reliable comparisons regarding growth rates.

Given that you will likely hold a work of art for several years, understanding the performance and value development of similar works or artists can be a helpful benchmark for what returns you can expect.

Experts suggest considering several helpful data points when evaluating art : first, one must consider whether there is a demand from art collectors to buy the artist's works.

When top collectors regularly purchase works by an artist, it's a strong indication that that artist's work will continue to be valued in the long term. Furthermore, a generally high level of recognition and popularity for an artist increases the likelihood of quickly finding a suitable buyer later on.

Peripheral costs also be considered when investing in physical art. These include – as already mentioned – the financial expenses associated with upkeep, maintenance, protection, and insurance. Especially with expensive works, these additional costs can be significant.

In order to fully determine the value of a work, these costs should be taken into account.

8. What art investors should know about NFTs

A new area in the already young market for digital art is NFTs , or Non-Fungible Tokens. These artworks are non-physical, digital forms of artworks that are traceable and verifiable using information technology.

The advantage of an NFT (also Crypto Art ) you to own artworks with digital integrity that cannot be replaced.

NFT Art is based on the blockchain network . This blockchain offers transparency, authenticity, and greater liquidity, allowing investors to easily conduct transactions.

Some of the world's most sublime works of art by artists such as Leonardo da Vinci , Vincent van Gogh , Monet and others are now available NFT market

Emerging artists also quickly recognized the advantages of digitizing art and jumped on the bandwagon. Mike Winkelmann, known Beeple auctioned "Everydays" for a record-breaking 69 million US dollars as reported by the Tagesspiegel ).

While this record sum was achieved amid media hype, NFTs fundamentally allow artists to sell their work directly to consumers and give individual investors access to that work in a vast, open marketplace.

Crypto art offers a new approach to investing in art , one that many people are still unfamiliar with.

The following three points offer you a rough guideline for taking your first steps in this new, still very dynamic market segment of digital art:

8.1. Visit an NFT marketplace

Investors interested in art NFTs should visit relevant websites that allow them to buy directly from artists. Alternatively, they could visit a marketplace that offers art NFTs.

OpenSea is a good marketplace that aggregates NFTs from a variety of marketplaces. It can also be a good idea to go directly to a specific marketplace like MakersPlace, Decentraland, Rarible, SuperRare or the Enjin Marketplace , as they often provide useful information about the art itself.

Upshot, a crowdsourced NFT valuation platform co-founded by Nick Emmons, offers a highly exciting approach to determining the value of crypto art. At its core, it creates a protocol that uses valuation games to incentivize people to honestly answer subjective questions. Upshot's first product aims to provide an efficient pricing mechanism for NFTs by paying experts for honest valuations.

8.2. Get yourself a digital wallet

Regardless of the platform used to purchase this asset, you will need a digital wallet , which you must fund with funds for the transactions.

Since NFTs are typically an asset based on the Ethereum protocol, you can use so-called Ether tokens as a means of payment .

8.3. Choose your favorite artwork and place a bid

After setting up the wallet, you can browse the NFT marketplaces and purchase the desired crypto art artwork.

It will usually be made available to you in digital form.

8.4. One more important note

With NFTs, it is crucial to invest in works created by artists who have a long-term vision of what they want to do and achieve with their art in order to create value.

Experts encourage investors looking to get creative with art NFTs to explore emerging technologies that specifically support the creator economy . For example, they should look at stocks that enable, drive, and fuel this transformation and this market.

9. Alternative ways to buy art directly

In recent decades, technological changes have led to the emergence of a number of alternatives to traditional forms of investment in the art market, enabling almost anyone to benefit from increases in the value of artworks.

9.1 Fractional Art Investing: Buying investment shares in artworks

You can either buy a work of art yourself – often the more expensive option – or buy shares in works of art via an online marketplace.

Recently, a new way of buying art has emerged: "Fractional investing." The basic premise is that valuable works of art appreciate more (and faster) than "cheap" works, and if many people pool their money, they can participate in these above-average returns.

Aside from the advantages of potentially higher returns, there are some unavoidable drawbacks to fractional art investing. Perhaps the most significant is the fact that investors in this case can never physically own and enjoy the art.

This alone contradicts the primary appeal of art collecting, namely viewing and enjoying the work of art one owns.

9.2. Investor platforms for investment shares

Digital platforms like Yieldstreet and Masterworks allow you to buy and sell fractional pieces of various types of artwork, so you don't have to write a sizable check for a single piece of art.

Masterworks is a great option, especially for the inexperienced art investor, as they do most of the work for you. Masterworks buys paintings and sells shares to investors, keeping them updated on the progress of the investment. The platform provider acts similarly to a fund manager in the stock market, acquiring blue-chip art at auctions on behalf of its investors.

He establishes a holding company for each work of art to acquire, store, promote, and resell it profitably. This company is registered with the SEC and issues shares to those who wish to invest in that particular work of art.

This securitization of artworks makes investing in art more affordable and the market for the artworks' shares more liquid. Investors can buy and sell shares much more easily than buying and selling the artworks themselves. Of course, this involves a fee for Masterworks' services.

With Masterworks, you don't own the artwork in the physical sense and don't need to worry about anything else. You can also spread the risk across multiple works, artists, or styles.

You and several other investors acquire shares in high-quality works of art, which are verified for authenticity by experts. Masterworks does not have specific minimum investment amounts; these vary depending on the specific investment offers available at the time of your investment.

Similar marketplaces include Maecenas (where you can buy shares in paintings) and Saatchi Art (where you can browse and buy works directly online).

9.3. Art Fund

There are fewer than 100 art funds worldwide, most of them in China. A well-known European provider is "The Fine Art Group ," which also has a presence and operates in Germany. This provider has extensive experience with art as an investment.

Art funds are typically closed-end funds, meaning they have a limited investment amount and usually involve entrepreneurial participation. Furthermore, they are tied to minimum investment contributions and are therefore not suitable for every budget.

The Fine Art Group offers so-called co-investments . This allows investors to participate in investments in individual works of art – with a typical investment period of less than 24 months.

Alternatively, art investors can also opt for a "Private Account" with a longer time horizon and investments in various works of art. The Private Account requires a minimum deposit of a substantial USD 3 million. In return, long-term returns are promised.

These funds cannot be traded through conventional brokers.

9.4. Art Indices

Firms such as Sotheby's (NYSE:BID) and Christie's , which sell art as an investment Art 100 Index by Art Market Research to justify their starting bids.

The index, which tracks sales of 100 artists across different regions, styles, and eras from 22 auction houses worldwide, can provide a comprehensive picture of how the global art market is developing.

In 2018, Artprice its Artprice100 index , which focuses on blue-chip artists. According to a report by The Motley Fool , the company states that the index grew at an average annual rate of 8.9% from 2000 to 2017.

Meanwhile, the S&P 500 grew by less than half during the same period (which began just before the dot-com bubble burst). On the other hand, the S&P 500 the Artprice100 in 2018 and 2019.

There are some problems with these art-oriented indices. First, they only consider the auction prices of sold artworks. All costs associated with investing in artworks are ignored and would certainly negatively impact the performance of art as an investment.

The second problem is a phenomenon known as "selection bias." Art market prices don't update every moment or day like the prices of securities traded on financial markets. Art indices are based on available auction data. If a work of art never sells, there simply isn't any data. And the works that don't go to auction are often worth less than what the last buyer paid.

These indices thus show higher returns than those prevailing in the art market as a whole. The indices are "biased" to only include the winners.

9.5. (Still) no ETFs

Unfortunately, there are (still) no exchange-traded funds (ETFs) or publicly traded investment funds specifically for art. Concentrating an ETF or investment fund on art is apparently not practical or economically viable due to the illiquidity of the art market.

The singularity and inherent scarcity of art prevent fund managers from simply buying more Renoir or Basquiat paintings, as they could with stocks, to satisfy investors in the face of rising demand.

If many shareholders of an art fund wanted to return their shares, the illiquidity of the art market would prevent the manager from easily selling the fund's assets.

But the past has taught us that things are only impossible until someone comes along and proves otherwise…