October 25, 2021 marks the 140th anniversary of the birth of the famous artist Picasso. Eastern time, October 23, in the world's famous casino - Las Vegas Paragon Hotel, Sotheby's and MGM Hotel Group held a unique evening auction, presenting 11 Picasso masterpieces, the auction site was full, the atmosphere was hot, 11 lots were sold in 45 minutes, the total turnover was nearly 700 million yuan, exceeding expectations.
01 The bidding is fierce, and the lover's portrait is sold at a sky-high price!
On the night of the auction, the most high-profile bidder was Picasso's 1938 painting femme au beret rouge-orange, depicting his lover Marie-therese Walter, who was Picasso's "beloved muse" and Picasso's most inspired and prolific masterpiece. The original estimate was US$20 million to US$30 million, but the bid was US$40.5 million (about HK$310 million).
Although the COVID-19 pandemic has restricted people's travel, the art auction market is as hot as ever, with online and offline complementing each other and going hand in hand, and there is still a strong demand for high-value works: the market is not short of money, and many funds are looking for "hard currency" to preserve value.
02 Overview of the art investment market
Since the outbreak of the new crown epidemic, the inflationary pressure brought about by the over-issuance of currencies around the world has made investors urgently need to look for opportunities. Stocks, real estate and art have always been the main tools for investors to make a profit. In China in particular, real estate and art are the most insurance-friendly investment categories outside of stocks. In 2020, the stock market has experienced the most ups and downs in history, and 2021 is even more difficult to grasp; under the firm policy of "housing and not speculation", China's real estate is undergoing structural adjustment, and real estate companies are walking on thin ice. In this case, the art investment market is gradually pouring in more and more investors, and the transaction price of art is constantly hitting new highs.
According to the Meimo Index research report, the average annual return on art investment is 10%, and the stock market is 10.4%, but the investment volatility of art is much smaller than that of the stock market. In the case of Monet's Water Lilies, its 60-year return on investment far exceeded the S&P 500 in the same period. At present, the annual global art auction transaction exceeds 400 billion yuan.
In addition, in the world art investment market, the proportion of Western artists' works has increased year by year. In the 2020 Hong Kong Christie's Spring Auction, the turnover rate of the Western art sector was as high as 98%, and more than half of the lots were sold at a higher price than the pre-auction overvaluation. At the autumn auction, the turnover rate of Chinese and Western art auctions in the "Modern and Contemporary Evening Auction" was 100%; in the Sotheby's Spring Auction in Hong Kong, half of the works were works from Western contemporary artists, and the total turnover of Western contemporary art accounted for 65% of the total turnover of the special auction. Among them, British artist David Hockney's "Thirty Sunflowers" sold for HK$114.8 million, becoming the fourth highest price for Western art auctions in Asia, which is also the first time that David Hockney's oil paintings have officially landed on the Greater China market.
03 Chinese Art Investment and Income Analysis
The works of art in the Chinese art auction market can be divided into three sections: Chinese painting and calligraphy, porcelain miscellaneous, oil painting and modern and contemporary art according to their types. According to the statistics of the "2019 White Paper on Art Investment of China's High-Net-Worth Individuals", the total turnover of the three major sectors in 2018 reached 49.19 billion yuan, accounting for 93.8% of the total turnover of art auctions in the whole year; from the perspective of market share, Chinese calligraphy and painting ranked first with a proportion of 39.5%; porcelain miscellaneous items ranked second with a proportion of 38.7%, and oil painting and modern and contemporary art accounted for 15.6%. The three major sectors achieved good annual compound yields in the 2018 autumn auction, (the calculation of the annual compound yield excluded the actual annual compound yield obtained by the impact of inflation, cpi based on December 2000), of which the oil painting and modern and contemporary art sectors had the highest average annual compound yield of 7.5%.
04 Art investment path selection and risks
We have heard of a painting saving a listed company, and we have also heard of an antique to save the fate of the entire family, art investment, although this direction is very promising, but it is not an easy task to want a double harvest of spirit and money.
The way to invest in art can be roughly through the following two ways:
First, direct investment in the purchase of physical works of art;
The second is to participate in indirect investment by investing in financial products related to works of art.
Investors who directly purchase works of art often have many risks in the selection, purchase, delivery and storage of art due to the special attributes of art, information asymmetry, lack of investors' professional knowledge, imperfect art market system and other factors. Indirect investment in works of art can be invested as a derivative financial product by purchasing art funds and other means. The fund manager is responsible for raising funds for custody, and investing in the art market through a variety of art portfolios or other specialized investment methods to obtain profits. Although this kind of investment has lowered the investment threshold, we should be cautious about the choice of art funds and fund managers, and avoid blindly following the trend.
For more questions about art investment, please scan the QR code below for consultation.