The art market is unique - certain artists and movements can see their values double or triple in a year, while others languish and fade away. It can be hard to understand and even harder to benefit from.
But there’s one approach that’s rapidly grown to be mainstream over the past few years: investing in blue chip masterpieces. It’s something that the wealthiest people in the world have been doing for literally hundreds of years.
Blue chip art investing refers to the practice of investing in high-quality, well-established works of art that are expected to maintain or increase in value over time. These works are typically created by well-known and respected artists, and they are considered to be a reliable investment due to their historical track record of appreciation. Given the high upfront cost associated with blue chip art investing (you can't buy a Monet for $100), this asset class has often been reserved for the ultrawealthy.
There are several reasons that blue chip art investing has remained one of the favorite asset classes of the rich and famous, including:
Potential for market-beating returns: While there are no guarantees in the art market, well-chosen blue chip art investments have the potential to generate significant returns over time. Over the past 25 years, contemporary art has returned an astounding 13.8%, vs. 10.2% for the S&P 500. And a study by Art Market Research found that the top 10% of blue chip artworks outperformed the S&P 500 index by over 200% between 2000 and 2018.
Portfolio diversification: Investing in blue chip art can provide diversification to an investment portfolio, as the art market tends to have low correlation with other asset classes such as stocks and bonds. This means that the performance of blue chip art investments is not influenced by the same economic factors that drive other investments, providing a hedge against market volatility. Even in times of recession, the art market has shown strong resilience that remains extremely attractive for investors who benefit from the accessibility of art investments.
Enjoyment: Unlike stocks or bonds, which are intangible financial instruments, blue chip art is a tangible asset that can be physically owned and enjoyed. This can make it a more appealing investment for some people, as they can see and appreciate their investment in a way that is not possible with other assets.
Fine art investment funds are another way to invest in blue chip art, however they are often private and require you to be an accredited or sophisticated investor. These funds are managed by professionals who select a diverse portfolio of artworks on behalf of their investors. Fine art investment funds can be a good option for those who are wealthy and want exposure but do not have the time or expertise to research and select individual artworks for their portfolio. Typically, these funds also offer the ability to invest in a broader range of diversified artwork by requiring less capital investment than simply buying the pieces outright.
Investing in digital art is a newer development in the art world, and it refers to the practice of buying and selling digital works, including those created using blockchain technology. There are some pieces in the digital art/NFT world that are considered Blue Chip, like Crypto Punks, Fidenzas and Bored Apes - however the volatility in this market has been massive. The rise of digital art platforms such as OpenSea and LooksRare have made investing in digital art easier and more accessible than ever.
While modern digital art is still a relatively untested and high-risk market, it has at times offered investors the same benefits as traditional blue chip art investing, including potentially high returns and diversification. Digital art also allows for easy viewing of art on any device, adding a new element of convenience. However, it is extremely important to carefully research and evaluate any digital art investment - and not invest more than you can lose - as the market is still developing and there are many unknowns.
To sum up, blue chip art investing can be a valuable addition to an investment portfolio, offering the potential for high returns, diversification, and the enjoyment of owning a piece that was physically created by a real human. As with any investment, it is important to do thorough research and understand the risks involved before committing any capital.