Between Creativity and Financial Growth: Art As an Investment

Considering art as an investment isn’t a new idea. As early as the 18^th century, French art dealer Charles Le Brun promoted the notion. This trend intensified with industrialization; in the past few decades art has increasingly established itself as a serious investment class and sparked the interest of investors looking to diversify their portfolios. In addition to direct purchase, there are also investment funds that invest in various works of art.

Works of art are sold through a variety of platforms, including galleries, auctions, and exhibitions. The market share of these platforms has changed dramatically in recent years. While the cancellation of many events in 2020 due to the Covid-19 pandemic led to a decline in sales at art exhibitions, the loss was partially offset by digital sales. Despite an increasing share of sales at events in the years that followed, there are signs of a lasting change in the market. Digitalization opens new and transparent paths to the art market. In particular, crypto art, represented by NFTs (Non-Fungible Tokens), is attracting attention, even though it is currently declining. NFTs provide a unique collecting experience and serve as proof of digital ownership. This development expands access to art via online platforms and virtual galleries that reach a wide audience. Platforms such as Artex go one step further and offer works of art as equities, while tokenization and crowdfunding offer new opportunities to obtain and trade fractional shares of art works. 

It can be exciting to support young Swiss artists whose works often remain in the lower price range of up to around 10,000 Swiss francs. “For long-term appreciation, however, an in-depth engagement with the artists is necessary. Prices, galleries, museum exhibits, and private collections are good indicators for potential. Alternatively, art funds such as Partasio offer investors access to first-class portfolios from 30,000 Swiss francs,” explains Simone Töllner, art and culture manager and co-founder of finews.art. Online platforms and tokenization models make it possible for private individuals to acquire shares in works of art with small amounts of capital. With art leasing, you can not only physically use the artwork for a defined period of time, but also benefit from any increase in value and potential profits during that time. 

In contrast to the financial market, the art market is largely unregulated and more susceptible to fraudulent practices such as tax evasion and money laundering. The art market isn’t immune to fluctuations and crises, but often reacts differently than the financial markets. After both the market crash on “Black Monday”, October 19, 1987, and the financial crisis triggered by Lehman Brothers in 2008, there was an observable flight into the art market. “In times of high inflation collectors view art as a store of value,” says Töllner, who adds:  “Yet, the art market still poses risks. Counterfeits and insufficient market transparency are challenges. Moreover, the art market is the largest legal insider market, which carries both risks and opportunities – particularly for well-connected investors.” 

The art market moves billions: In 2023, the global art market was estimated at 65 billion US dollars. In addition to the enormous, continuous growth trend, an important development in recent years is the digitalization of the market – from NFTs to the tokenization of art investments “The Artprice100 index shows that the art market has posted annual returns of 8-9 % over the last decade, while top artists earn up to 15%,” says Töllner. However, stable performance isn’t always guaranteed. Works by blue-chip artists such as Picasso, Warhol, or Richter are considered particularly safe investments.

 “Factors such as globalization, the rise of the Asian markets, and digitalization via online auctions have an influence on today’s art market,” states Simone Töllner. She adds that “the societal focus on diversity, including African American artists, queer art, and indigenous artists has increase demand for new perspectives. And the re-discovery of women in art has contributed significantly to this.” New digital art forms such as immersive art and AI-generated art shape the future of the market. Diversity and sustainability are growing more important, and influence both artistic content as well as attitudes among collectors and investors. The latest trends that they were exposed to at this year’s Biennale in Venice underscored this development toward greater diversity and inclusive perspectives.

Art offers not only a financial value, but also an emotional and cultural experience. Collectors enjoy discovering and appreciating new works. Art has developed into an investment class that has the potential for financial returns.  Financial advantages such as diversification make investing in art an appealing proposition since the art market is independent of the fluctuations found in traditional markets. Like any investment, it comes with risks and requires careful consideration, ranging from knowledge of the market to ensuring proper storage and authentication. With the right knowledge and strategy, art can offer both aesthetic pleasure and financial growth.