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Alternate asset classes: arts

Alternate asset classes: arts

These days, it seems that art has become the new, hip must-have investment. But, no longer is the case that only wealthy and bouji people could become art connoisseurs. Major auction houses like Sotheby’s (BID), Christie’s (CTG), and Phillips have seen the emergence of younger art collectors (the so-called “scroll-and-swipe” generation), the very people who have become a key factor in the strength of art markets globally.

Beyond its aesthetic value, art’s ability to survive economic downturns (and even turnover attractive returns up to 266,584% according to CNBC reports!) fuelled demand over the past year. Sales of art and antique pieces hit a record high of $12.4b in 2020, doubling in value from the previous year, according to The Art Market 2021 report by UBS and Art Basel.

This week, we explore the opportunities within the art market to diversify your investment portfolio, and we cover sub-asset classes street art, graphic novels, and music — so put your barets on!

Street Art

Graffiti has been around since cavemen days, but from being dismissed as illegal vandalism to selling for millions in prestigious galleries, it has come a long, long way. Masterpieces have moved from building walls to canvas as a more practical option for collectors to admire (and buy!). There are now, even, dedicated indexes tracking their performance — Mei Moses All Art Index, Art Market Research, and Artnet, to name a few.

We have to thank one person in particular for these advancements — and that’s Banksy. His work on the streets of London became so sought-after that his art even spiked the property prices of the buildings that they adorned. Last year, his four-metre-wide canvas depicting MPs in the House of Commons as chimpanzees set a record for the artist, selling close to £10m at a Sotheby’s (BID) auction after just 13 minutes of bidding. No doubt that anyone who had bought an early Banksy for way less will raise their eyebrows concerning what the value their own Banky originals might be worth today.

Following Banksy came a whole new generation of talented artists like KAWS, Mr Brainwash, Kev Munday, Hayden Kays, Daze, and Shepard Fairey, and all are experiencing plenty of attention globally — so watch out for the value of their pieces in the years to come! Just last week, British contemporary graffiti artist Sacha Jafri sold the world’s largest painting (at 1,800sqm-wide, it wouldn’t even fit in an apartment!) at an auction in Dubai for $62m. In fact, it was the most expensive artwork ever sold in the UAE!

Graphic Novels

Once upon a time, comic books were just read and shared among nerds. Over the years, thanks to their growing popularity and movie adaptations — Disney (DIS), you know what we’re talking about — graphic novels have started serving as investment opportunities too. Yes, that’s correct, you can invest in your favorite superheroes! Well, illustrations of them, at least.

Generally, graphic novels get more valuable as they get older and rarer. The rule of thumb is: the harder it is to find a certain comic book edition, the greater the chances of it returning a premium if sold. But, graphic novel premiums also depend on the popularity of their main characters. A few months ago, a near-mint copy of Batman #1 from 1940 sold at Heritage Auctions (HGBL) in Dallas for over $2m. However, the top spot in belongs to a pristine issue of Action Comics #1, featuring the first appearance of Superman (sorry Batman!), which sold in 2014 for over $3m on eBay (EBAY).

While we know it’s hard to beat the DC and Marvel universes — last year, Sotheby’s (BID) made Japanese manga fans happy with its Hong Kong-based manga auction, at which an assemblage of pieces from Pokémon, to Dragon Ball, to Totoro, and even Doraemon sold for thousands. In Dubai, too, the annual Comic-Con event attracts enthusiasts and fans who are hunting for eye-catchy pieces to purchase. Seems like the graphic novel craze runs across all cultures!

Music

The great David Bowie was far ahead of his time. He used to sell future royalties of his music to investors and formed a “Bowie Bond” that raised millions, which he later used to buy back the rights to all of his music. What a broker!

Owning the rights to hit songs used to be an obscure game for music industry insiders, but with the current streaming revolution thanks to platforms like Spotify (SPOT) and Anghami, music royalty sales have been booming. Now, you can find outlets that focus solely on music rights as a form of investment, like Hipgnosis Songs Fund Ltd (SONG), which shelled out around $700m pounds last year for the rights to songs from Blondie, Soundgarden, the Pretenders, and other artists. The company’s shares are now returning 17%, just FYI!

Another way companies can monetize this genre is through marketplaces like Royalty Exchange, a Denver-based firm through which artists sell royalties to fund their work. Some companies are even taking this a notch further and leveraging technology to enhance the credibility of the asset class. Take, for example, Note Music, a platform built on blockchain technology that helps artists, record labels, publishers, and songwriters to become financially independent through music rights sales.

Musical collectibles can be a good place to start investing in music as well. Since the “Lady Blunt” violin sold for almost $16m in 2011, we haven’t been able to look at instruments the same way again! You can also scout for vintage records, autographed pieces, and posters at a lower entry price with the following mantra in mind: all can go up in value over time.

why it matters
Art is one of the most popular forms of alternate investments due to its resistance in times of economic downturn. With the current fluctuations in stock markets as an aftermath of the pandemic, looking into the art market’s sub-asset classes like street art on canvas, rare comic books, or even music royalties could be a wise choice. And hey, they could also make good conversation starters!