Investing in the art world can seem daunting. You have so many different options and opinions that it’s hard to know where to start. However, investing in art can be timeless, and if you invest in a high-quality piece of artwork itself, it can be a fantastic store of value and investment vehicle that many other investors simply miss.
But, the question is, where should your money go when you make an alternative investment like art? In this article, Benzinga will take you through everything you need to know about your art investment options and the best art investments right now.
The Best Art Investment Platforms
- Best for Art Investing: Masterworks
- Best for Diverse Range of Alternative Investments: YieldStreet
- Best for a Selection of Private Art Funds: Artemundi
- Best for Post-War and Contemporary Art: Anthea Art Investments
- Best for Pooled Art Funds: The Fine Art Group
- Best for Finding Unique Investments: MoneyMade
Masterworks is an example of an investment fund that enables investors to own shares of famous works of art through its crowdfunding platform. The artwork is held in a secure environment while Masterworks searches for a buyer to sell it at a profit. As a result, Masterworks provides a more accessible way to enter the art investing world.
If you are unsure which art funds to watch, take a look below for a list of the best art funds available. From Banksy to creatives featured at Art Basel, Andy Warhol and the greater art marketplace, there’s somewhere you can put your money that is both enjoyable, beautiful and profitable.
1. Best for Art Investing: Masterworks
Masterworks is an investment platform that allows individual investors to buy shares of some of the most sought-after artwork on the market. An art collector cannot spend all their time at an art gallery or auction, but the team at Masterworks brings those forums to you.
Investors can buy shares in current art offerings as well as trade shares on the platform's secondary market. Artwork on the Masterworks platform has appreciated at an average rate of 14% annually. Masterworks allows investors to buy shares in legitimate blue-chip artwork.
However, the art sales team charges an annual fee of 1.5% along with 20% of the profits. There is no account minimum but minimum buy-ins can vary as you attempt to diversify your investment portfolio.
- Easy access to artworks on a fractional basis is a much easier way to invest for more people
- The artwork that is offered is verified and legitimate, meaning that you don’t need to be an art expert to invest properly
- Annual fees could get pretty high, depending on your investment
2. Best for Diverse Range of Alternative Investments: YieldStreet
YieldStreet is an alternative investment platform that allows individual investors to participate in a variety of alternative investment funds. They currently offers two art investment options. One such fund is the YieldStreet Prism Fund, which holds multiple types of assets such as real estate and art loans. The minimum investment for the Prism Fund is only $500 and has an annual distribution rate of 8%.
The second option is the platform's new Art Equity Fund, which currently has a portfolio of 8 Post War and Contemporary Paintings. The fund has a minimum investment of $10,000 with target returns of 15% to 18% over the 5 year holding period. This is not the same as an auction house, but there will be blue chip art available from time to time.
- You can invest in several alternative options, like artwork
- There is a low minimum investment and a high annual distribution rate
- The Art Equity Fund offers every more substantial pieces in which you can invest
- Art selections may be limited because the platform offers several types of investments
3. Best for a Selection of Private Art Funds: Artemundi
Artemundi was started with the idea that it could help clients grow their art portfolios in this asset class without focusing on blue chip art, buying into the most expensive niches of the art world or over-investing in the fine art market. Here, you can invest in art in unique ways and leverage technology to make the most of every investment. The platform cuts down on fees as much as possible, and has an expert team that knows the Impressionist, Modern, Post-War and Late 20th Century art markets very well.
Founded in 1989, there have been billions of dollars in transactions handled by the service, and the firm is also using blockchain technology to better security artwork and provide for a more unique investment experience.
To that end, the platform uses ASTs or Art Security Tokens to provide a lower barrier to entry. This means that investors can purchase “shares” in artwork, further bolstering the portfolio. Plus, this makes it easier for investors to track where their money is going, because fractional ownership is simpler to track and allows you to buy into several artworks at once.
- Investing in art shares helps buyers spend less and remain on the right side of a strong hedge
- The team that manages Artemundi is loaded with experts who can help you
- There are several focus periods in which you may be interested
- While the blockchain is innovative, many investors may feel uncomfortable with this level of technological usage
4. Best for Post-War and Contemporary Art: Anthea Art Investments
Anthea Art Investments offers two platforms: CAIO and CAIF.
The Contemporary Art Investment Fund (CAIF) is a fund that allows for investment in post-war artists, lesser known artists and young or emerging artists. The fund could include art, paintings, sculptures and even photographs from the Post-War period (after 1945).
The Contemporary Art Investment Opportunities fund is a recent addition to the Anthea stable, allowing for tax-advantaged art investment across a wide range of artworks. In either case, it’s much easier to buy in because investors need not make whole purchases of artwork.
- There are 2 investment funds that offer you access to a range of artworks
- There are paintings, sculptures and even photographs included in these collections
- The platform only deals with artwork from the Post-War period, which may not be to the liking of certain investors
5. Best for Pooled Art Funds: The Fine Art Group
The Fine Art Group Fund offers several options for art investment which include:
- Private Accounts
- Pooled Investments
You can open a private account at any time and work with the team to build an art collection. Co-investments allow you to buy into artwork with another investor, ensuring that the two of you share the risk that comes with that investment. This is why you need to check the price tag on your art before you invest because you may want to pool funds with multiple people.
Finally, pooled investments allow a group of investors to buy into artwork, ensuring that each person owns a small percentage of each piece. Yes, these accounts will own artwork wholly, but you may feel safer investing here because you will own a much larger percentage of the investment.
- You can invest with pooled resources, on a larger scale than a fractional investment
- You can co-invest with another investor on a single work of art
- There is an expert team that will help you find the proper items in which to invest
- Fractional investing is limited on this platform
6. Best for Finding Unique Investments: MoneyMade
When you log on to MoneyMade, you have a simple task—ask a question. The platform will give you answers to any question on investing, and it will help you find unique investments that you have never seen before. Moreover, it has popular questions on the homepage that you might want to ask first. Think of this as the place where you can go down the “investing rabbit hole” before you determine what you will add to your portfolio next.
You can use MoneyMade to learn about real estate, art investing, fine wine and a range of alternative investment options that give you more than stocks to think about.
- The questionnaire format allows you to be creative when searching for asset types
- MoneyMade is constantly updating popular questions and letting you know what’s trending
- The single-page design is very easy to use
- The site can only aggregate information, and it’s possible that you might miss something it hasn’t found yet
Is Art a Good Investment?
If there is one stereotype about art investments, it’s that it mainly involves older rich people. However, that is not necessarily the case. Even though the costs of investing in art can be high, various ways of investing in art can make money from the investment.
One thing to be aware of is that art is generally a long-term investment. The value of art can make significant gains during prosperous periods or remain stable, but its value can also plummet in recessionary periods.
Like investing in other assets, you must conduct thorough research before making an investment choice. Again, like investing in other markets, you are not assured a profit, but if you complete the necessary due diligence, you will be able to make good art investment choices and, maybe, find a gem or two.
The Benefits of Art Investment
Of course, any investment is made because of its potential value over a period of time or the returns it will bring in. Now, unless you are investing in a company involved in art, the art itself isn’t going to bring in a profit every quarter. However, as we mentioned previously from the Citibank report, investing in artwork can provide returns similar to the bond market. So if you make the right investment choice, art can be a safe investment, providing a return over time.
Another benefit is that it is not correlated to the stock market. The stock market can sometimes be highly volatile, but these fluctuations won’t impact the art world. So if stocks have a bad day or are in a bear market, your art can still gain in value or at least hold its current value.
Of course, as mentioned, art is seen as a long-term investment by many and can build value over a long period. However, some pieces can surge in price. Therefore, if you can find a piece that is blowing up in popularity, you may be able to gain a considerable profit in a short time.
Who Should Not Invest in Art?
As mentioned, art is generally a long-term investment. So, investing in art is not for someone looking to make a fast buck or liquidate the investment quickly. According to a Citibank report from 2019, returns for art investments are similar to that of bonds, averaging a return of 5.3% per year between 1985 and 2018. So, if you are looking for surges in value similar to cryptocurrency, then investing in art is not for you.
Art is a tangible asset, so if you have no interest in maintaining and displaying the artwork, it may be best to avoid investing in a piece. Most art investors not only buy the work because of the potential monetary value, but they also purchase art due to their fondness for it and desire to display it in their homes. As it is a long-term investment, it is better to buy a piece you can display at home and, more importantly, maintain, so that it holds its value before you can sell it.
Finally, if you don’t have the time to learn about art and have no interest in the topic, it is probably best left alone. Like any other investment, you must know and understand the market before putting your hard-earned money into it. You wouldn’t purchase a stock without researching why you believe it will gain value first, and it should be the same when investing in art.
Potential Drawbacks of Art Investments
Art is a non-liquid asset, which is a drawback when compared to other investment types. Unlike stocks, you can’t just open up a laptop and invest in art instantly. Buying and selling art can take time and patience. You need to have time to plan the investment if you want to be profitable.
One of the main drawbacks to investing in art is the barriers to entry. These include the cost of financing the purchase and the lack of knowledge for beginners. Investing in art can be a costly process, and it won’t be in everyone’s budget. Meanwhile, it is essential to know the market you are investing in. Art pieces are not the same as stock shares, so make sure to familiarize yourself with the market before you enter it.
Maintenance is another drawback of art investing. While some people may prefer having the physical asset in their possession, for others, storing, displaying and taking care of the piece can be challenging. The work needs to be maintained to preserve its value, and you may also want to insure it. All these considerations can deter potential investors.
Other Ways to Invest in Art
Check out a few other options you have as an investor to add art to your investment portfolio.
Art investment funds are much like any other investment fund in that the fund managers buy and sell assets, in this case, artwork, intending to make a profit. Participation in an art fund allows investors to own fractional portions of valuable pieces of art.
Another fund is the Fine Art Fund Group, which claims to have a 20.2% average annualized internal rate of return (IRR) on all transactions and $3.3 billion worth of artwork valued. The company focuses on western art from 1500 to the present with an emphasis on impressionism, surrealism, modern and contemporary art and jewelry.
Unfortunately, no art exchange-traded funds (ETF) trade actively right now, but that is due to the lack of liquidity in the art market.
The Artprice100 Index was launched in 2018 with the aim of monitoring the art market’s value. The index tracks the 100 top-performing artists at auction over the previous 5 years to give a sense of how the art market is performing. Therefore, you invest in the 100 artists whose auction results are consistent and have the highest turnover in the previous 5 years.
The value of the index evolves depending on the individual performance of each artist in the portfolio.
Art Market Research’s All Art Index is the weighted moving average of 24 months’ worth of sales at 130 auction salerooms worldwide. Listed companies such as Sotheby’s (NYSE: BID) often look at the All Art Index to gauge the market.
One issue with art indices is that they fail to factor in the other costs of investing in art.
Buying in Galleries or Auctions
Buying in galleries or at auctions is an excellent way of investing in art. However, a lack of knowledge or understanding of the market and how it works will lead to bad decisions if you invest in this manner.
If you don’t have the required knowledge or lack time to learn about the market, then it is best to trust experts in the field and invest in a fund. For example, buying a piece from a gallery will usually mean you pay a significant mark-up, but it also promotes the artist.
Alternatively, going to galleries and attending auctions can be a great way of learning about the market, eventually leading you to make better investment decisions.
Art is Not Like Other Investments
The art market is unlike any other. Of course, if there is a major economic depression, it will be impacted, but it doesn’t stay in tune with the stock market or strongly correlate with any other market.
If you choose to invest in art or an art fund, research and experience will be key. Take the time to learn online, go to galleries and attend auctions. Learn as much as you can first.
Investing in art comes with difficulties and risks. The most important thing is to have a passion for the market and art itself. In that way, if you invest in a piece of art that eventually rises in value, it will be an added bonus.
Frequently Asked Questions
Is art a good investment?
If you are looking to diversify your portfolio and you have a passion for art, then it can be an excellent investment choice. If chosen wisely, an art piece can steadily appreciate in value over time and be a great store of wealth.
How do you invest in art pieces?
You can invest in art via funds such as Masterworks and others, whereby you own a portion of individual pieces, or by buying pieces from galleries and auctions. However, buying individual pieces will take some time and effort to make sure you make the right art investment choice.
What is the best type of art to invest in?
The best type of art to invest in is subjective and depends on individual preferences and market trends. However, some popular forms of art that have historically shown good investment potential include contemporary art, works by renowned artists, and art from emerging markets. It is important to conduct thorough research, seek expert advice, and consider factors such as the artist’s reputation, historical sales performance, and market demand before making any art investment decisions.
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