If you have even a penny in the stock market right now, you probably know that it’s been a bit… chaotic lately. Rising inflation, continuing supply chain issues, new COVID-19 variants, and a spate of other global issues have all contributed to wild swings in publicly-traded share prices.
And with the S&P 500 down almost 14% YTD, it’s no surprise that money managers and investment advisors are turning to alternative assets—like real estate, startups, and collectibles—to ride out the storm.
As a marketplace for alternative investment opportunities, Republic has always been a one-stop shop for investors looking to diversify into startups, crypto, video games, real estate, and more. Today, we’re excited to introduce a new kind of alternative asset to our platform: fine art.
Investing in art: a brief history
André Level, an art critic and dealer known for his early support of Matisse and Picasso, pioneered the first modern art investment fund—a collection called La Peau de l’Ours—at Sotheby’s Paris in 1904. (Fun fact: “la peau de l’ours” loosely translates to “counting one’s chickens before they’ve hatched”—a cheeky nod to the optimism and confidence Level approached his investments with.)
Joined by 11 of his friends, Level amassed a collection of Impressionist art, including pieces by Picasso, Matisse, van Gogh, and many others. When the collection sold at auction 10 years later, the men quadrupled their money and even shared some of the proceeds with the artists themselves.
Today, fine art remains one of the most popular alternative asset classes for the ultra-wealthy. Here’s why:
Art investment by the numbers
Talk to anyone who considers themselves an art collector, and you’ll immediately understand that these assets are much more than just decorations—they’re often strategic investments, too. These are just a few of the qualities that make art investments such attractive additions to a diversified portfolio:
A massive market
The global art market was worth more than $65 billion in 2021, with over 36 million transactions completed worldwide. Last year’s highest-priced sales spanned a range of styles and origins; the most expensive piece sold was a Picasso painting, Femme assise près d’une fenêtre (Marie-Thérèse), that went for $103.4 million. The 10 most expensive sales alone accounted for a whopping $786.9 million in proceeds, signaling a healthy consumer appetite for fine art.
A promising track record
A report by Citibank found that between 1985 and 2018, the art market as a whole returned an average of 5.3% annually—much higher than any high-yield savings account on the market today. Zoom into the contemporary art category, and that annual yield jumps to 7.5%. In fact, in 2018, the art market’s returns outpaced the S&P 500.
Portfolio diversification as a strategy
Statistically speaking, diversification is one of the best ways to hedge against risk and boost your chances of making a return. That’s why most professional money managers recommend spreading capital among many different asset classes (think: stocks, bonds, real estate, startups, and more). Investing in art is a unique way to add diversity to any investment portfolio.
Resistance to market swings
Part of what makes art so attractive is the fact that its performance isn’t correlated with any of the other major asset classes (think: the stock market). That means market downturns may have less of an influence on fine art investments. During the Great Recession in 2008, all types of art lost an average 4.5% in value; at the same time, the S&P nosedived by a whopping 37%.
Investing in art on Republic
As Republic continues to expand, we’re thrilled to broaden the scope of our deal flow to include important cultural assets—art included. Check out our live art offerings below, and keep an eye on your inbox. There’s much more exciting deal flow in the pipeline!
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