There is no doubt that the art world is becoming increasingly financialised – but is this happening to the detriment of the lesser-known artists? Lisa Karczewski, an attorney with law firm Fox Rothschild, says that while the price of some artists’ work is soaring as a result of financialisation of the art world, others are experiencing a decline.
“With the globalization of the art market and significant increase in wealth, particularly in the new growth markets of Asia, the Middle East and Latin America, an increasing number of ultra-high-net-worth individuals are buying and investing in art and collectibles,” she says. “The 2014 Art & Finance Report by Deloitte and ArtTactic revealed that 76% of surveyed art collectors acquired art and collectibles as an investment strategy in 2013, up nearly a quarter from 2012.
“This presents a tremendous opportunity for art financiers and wealth managers to provide a diverse range of art and wealth management services and thrive on the backs of some of the world’s most affluent art collectors. In recent years, art collectors are increasingly using their art as collateral and then reinvesting the funds in either additional art or other assets. Art finance is regarded as a wise way to use one’s capital such that by leveraging one’s art, the work can stay on the wall, while creating greater liquidity among collectors.”
The problem, she says, is that when the primary reason for acquiring art is adding value to one’s investment portfolio, buyers seem to focus on a very narrow range of established and marketable artists and ignore the other less established and marketable artists.
“Buyers and values tend to significantly drop for less established names. Accordingly, the more the art market becomes financialised, the greater the risk that demand from art collectors will become narrowly focused on a few exclusive and expensive names in the art market.
“Of course, artists will always fall in and out of fashion as driven by collectors’ specific tastes at the time and the current trends in the art auction market.”
Based on the current trends driving the Art & Finance Industry, Karczewski believes the financialization trend will continue.
“However, only time will tell whether buyers will continue their focus on a narrow range of established artist names,” she adds.