Art as an Asset

Global Art Market

In the aftermath of the Covid-19 pandemic, the global art market demonstrated a remarkable recovery in 2022 following its sharpest decline since the financial crisis of 2008. The art and antique sales surpassed pre-pandemic levels, reaching an all-time high of approximately $67.8 billion, indicating a 3% increase in sales from the previous year and surpassing pre-pandemic levels of $64.1 billion in 2019 by 5.28%.¹

The structural changes triggered by the pandemic favoured the market for prints and editions in particular. In 2022, this segment was able to achieve an 8-year record of $95.5 million in sales.² This represents an increase of almost 30% compared to 2021, 66% compared to 2020 and shows a 20% increase also in relation to 2019 pre-covid sales of $79 million.³

¹The Art Basel and UBS Global Art Market Report, 2023, p. 20
²ArtTactic Market Analysis, Prints & Editions, Impressionist, Modern Post-War & Contemporary, 2015-2022
³Ibid.

Online Art Market

The art market has undergone a digital shift, which has been accelerated by the pandemic and resulted in remarkable growth in the online segment of the industry. Specifically, sales volume grew from $6 billion to $13.3 billion within just two years.¹

However, the return of traditional auctions and art fairs, coupled with the tendency for higher-priced sales to remain primarily offline, has led to a deceleration of this growth in 2021 and 2022. Nonetheless, the role of digital technology in facilitating and supporting sales has continued to expand, as evidenced by the increasing utilization of online bidding in the auction sector. Online sales already represent the most significant channel, with a share of 75% at Christie’s and as high as 91% at Sotheby’s.²

The art market’s investment in digital platforms and strategies, combined with the increasing acceptance and frequency of digital channels by collectors, suggests that the online share of the primary market will continue to grow. In summary, the data indicates that the digital art market will persist in its expansion, driven by the escalating adoption of digital technologies and the expanding acceptance of online transactions.

¹ The Art Basel and UBS Global Art Market Report, 2023, p. 30
²The Art Basel and UBS Global Art Market Report, 2023, p. 32

The Contemporary Art Market

Post-War and Contemporary art remains the primary impetus of the global art market, constituting 76% of total sales and amounting to $7.8 billion in 2022.¹ Compared to 2021, this is a decline of 8.2% in sales in 2022, mainly attributable to the Zero-Covid strategy in China, which previously was among the most substantial consumer markets for Contemporary Art.² Conversely, the United States, another major player in the art market, witnessed a 20% rise in sales during the same period.

Projectoring the data from previous years to eliminate the influence of the Zero-Covid strategy, the market would likely have grown by +9%.³ Therefore, we expect an increase in this market segment in 2023. At Weng Art Invest, we offer selected editions of the top 100 contemporary artists so our clients can profit from this potential market development (even though no predictions from the past can be derived for the future).

¹ The Art Basel and UBS Global Art Market Report 2023, p. 184
² The Art Basel and UBS Global Art Market Report 2023, p. 185
³ Artprice, Key figures for the Contemporary Art Market

“Sotheby’s, Christie’s and Phillips’ online-only auction sales broke through US$1 billion for the first time, ending up at US$1.05 billion in 2020, up from US$168.2 million in 2019”

Why Buy Art?

Art as an asset class can offer high returns, on a short, medium and long term. In addition, it has, in general, a relatively low correlation to other financial assets which makes it an interesting asset for portfolio diversification. Furthermore, it can be a safe haven in times of uncertainty and inflation.

Diversification

The art market’s ability to cope with unpredictable and unprecedented crises (e.g. 2001-03, 2008-10, 2020-21) has drawn attention to art as an alternative asset class.
The Artprice100© index is widely recognized in the art market as a reliable barometer for measuring the financial performance of the global art market. This index tracks the hypothetical financial return that investors could achieve by investing in the top 100 commercially successful artists worldwide, without considering any subjective or preferential factors.

Despite the 19% decline of the S&P 500 in 2022, the global fine art auction market achieved an unprecedented milestone outperforming the S&P 500 by 250%.¹

This means that investing in the artists included in the Artprice100© index would have resulted in superior returns compared to the S&P 500. For those who know what to buy, when and where, art can be a very attractive addition to their asset portfolio.

This phenomenon is also evident in the limited edition market, where select works have achieved notable appreciation. For instance, Alex Katz’s “White Roses” print demonstrated an exceptional growth rate of 650%, increasing from a value of $6,000 to $45,000 over an eight-year timeframe. Similarly, Damien Hirst’s “The Virtues” Portfolio realized an impressive growth of 344%, increasing in value from $36,000 to $160,000 within the span of a single year.^²

Low correlation with Financial Market

When investing, risk is a critical factor that must always be considered. Despite the diversification achieved through investing in various index funds, investors remain exposed to the possibility of market downturns.

Art, on the other hand, exhibits little correlation with stock indices or financial markets, serving as a store of value that is relatively independent of traditional asset movements. As evidenced by recent market data, the art market remained resilient during the pandemic crisis, performing positively compared to other asset classes.

For their 2022 report, Citibank calculated the correlation between art and other asset classes, which showed that art exhibits an exceptionally low correlation with all general asset classes. Notably, art shares a stronger relationship with real estate, another tangible asset class, exhibiting a correlation of 21%.³

As shown in the graph below, a previous Citibank report, from 2020, confirmed an even lower correlation between art and other asset classes during periods of crisis, such as the one witnessed during the pandemic.⁴

Tangible, stable value and inflation safe

Artworks, particularly those created by world renowned artists, tend to maintain their value and are often less susceptible to fluctuations in fashion trends and market speculation. However, not all artworks are created equal, and some may not yield the same financial returns as others.

Despite this variability, the art market has demonstrated remarkable resilience during periods of economic downturn, and investing in art may serve as an effective hedge against inflation and a dependable store of value during times of heightened uncertainty in the financial system.

¹https://www.investing.com/studios/article-1012
² Price data by www.wengcontemporary.com
³Citi GPS: Global Perspectives & Solutions, Global-Art-Market-Disruption-Pushing-the-Boundaries
⁴Citi GPS: Global Art Market and Covid19, Innovating and Adapting, p. 8

“26% of art professionals claim that tokenization could become a key investment product for their clients.”

Source: Deloitte & ArtTactic: Art & Finance Report 7th Edition

Challenges

vs.

our Solutions

OF BUYING ART AS AN ASSET

High Extra Costs

The additional costs involved in buying and collecting art, can surprise first-time buyers. In fact, there are many factors to consider when purchasing an artwork such as: transaction costs, sales and import taxes, artist resale fees, insurance, storing, transport, installation, maintenance. For example, when buying at auction, a buyer has to consider the buyer’s premium, which varies between 20-30% of the hammer price. Similarly, art dealers’ commissions range between 30-50% in the primary market and 5-20% on the secondary market.

No Extra Costs

Purchasing art with Weng Art Invest does not involve any hidden costs, nor any sales and import taxes, artist resale fees, insurance, storing, transport, installation, maintenance or extra advisory costs. Such additional costs will only occur during the eventual redemption process (see FAQ for more information).

Opaque Prices

Information on traditional assets in the financial markets are public and available to all. This is not necessarily true for the art market. Aside from the lack of access to information due to the majority of sales being private ones, it can also be hard to find reliable comparisons.

The logics behind private sales are mostly opaque and lacking data. On the other hand, auctions and online marketplaces generally display prices, however, this data is not necessarily available to everyone and cannot be considered as fully representative of all sales.

Transparent Prices

Asset pricing, trading and sales history are openly displayed on our platform. This gives our clients the possibility to keep track of the value of their artworks in real time. Additionally, the logic behind price changes and developments on the platform follows the clients’ supply and demand, democratizing the marketplace dynamics. Charts and graphs are also available to keep track of one’s portfolio development or general artist’s performance.

High Entry Asset Price

The art industry is known to have a high barrier to entry. Blue-chip artworks often close auctions with million-dollar sale prices.

Low Entry Asset Price

Limited editions are original artworks produced in series. This peculiarity allows limited editions to have a much lower price point than most unique artworks. However, as they are produced by the same world renowned artists, editions have a high quality and chances of increasing in value.

Long Term Investment

Investing in unique artworks by world renowned artists is comparable to investing in real estate or classic cars. These assets are highly costly and mostly illiquid, thus cannot easily be sold for quick cash. Similarly, the market for these pieces might sometimes be static and require longer holding periods to achieve positive returns.

Short to Medium Term Investment

Weng Art Invest specializes in limited editions artworks, which offer a much more liquid and dynamic market, although still allowing investors to hold on to their assets long term. The Weng Art Invest platform offers users the ability to monitor the pricing trends of their artwork and offer their artworks for sale. After a year, users can also redeem their tokens without having to pay any taxes on the profit they make from selling it.

Lengthy and Costly Process

Selling an artwork might be a very lengthy and costly process, mostly involving the participation of third-parties such as auction houses, dealers or galleries. Transactions made via traditional sales channels will always require sale’s commissions and do not always guarantee that the artwork will be sold in a timely manner, nor at the expected price.

Simplified Processes

With Weng Art Invest, buying, offering an artwork for sale back to us and redeeming an artwork can be done directly on our platform without any extra sales commission. It is stress free and only one click away. Selling and redeeming an artwork can be done via the personal portfolio on our platform.

Lack of Art Market Knowledge

Although not every investor has specialized knowledge about every asset in her portfolio, there is often public information available, as well as accessible guidance.

However, the art world is not as easily navigable, and until recently, it was fairly closed off to most collectors or investors. Art requires specialized and insider knowledge in order to avoid deception and risk of fraud.

25+ Years of Art Market Expertise

Our team consists of professionals with backgrounds in both the art market and finance. For our platform, we carefully select world renown artists, who already have a proven and established secondary market. Their limited editions are therefore desirable collector’s items which in most cases have a good value stability.

High Dependence on Intermediaries

To be able to acquire an artwork from a world-renowned artist, buyers often have to rely on intermediaries’ expertise. Art auction houses, dealers, and galleries curate relevant selections, verify the provenance, and choose a trustworthy buyer who does not immediately resell the artwork (“flip”). Even when reselling an artwork, art owners are dependent on these intermediaries. In this case, they provide a trustworthy selling environment, have connections to relevant customers, and can obtain the highest price. However, this dependence results in high ancillary costs for art buyers and sellers.

Independence from Intermediaries

Weng Art Invest offers a unique opportunity for art buyers to purchase artworks directly without the need for intermediaries. This means that buyers can avoid paying any extra costs, such as commissions, transaction fees, or artist resale fees, and only pay the price for the artwork itself. Moreover, the platform’s streamlined process makes selling artworks easy and efficient, allowing users to simply request a sale based on the bid price presented in the trading section, without incurring additional expenses for commissions, shipping, or insurance. This not only offers cost savings but also saves time for buyers.

Counterfeits

In the art world one is confronted with the problem of counterfeit items, frauds and other uncertainties. In order to avoid these risks, it is crucial to do some research: check the provenance, get an expert’s opinion and obtain certificates of authenticity. This process can end up being very time consuming and expensive.

Impeccable Provenance & Condition

Our long-standing partnership with the artists, producers and manufacturers of the editions traded guarantees authenticity, provenance and quality/condition for all our limited editions (important in case of redemption). Thus we avoid risks and additional costs. In case users redeem an artwork, they will also get a certificate of authenticity.

Challenges

vs.

our Solutions

OF BUYING ART AS AN INVESTMENT

Opaque Prices

Information on traditional assets in the financial markets are public and available to all. This is not necessarily true for the art market. Aside from the lack of access to information due to the majority of private sales compared to public ones, it can also be hard to find reliable comparisons.

Transparent Prices

Asset pricing, trading and sales history are openly displayed on our platform. This gives our clients the possibility to always keep track of their assets and investments in real time.

Additionally, the logic behind price changes and developments on the platform follows the clients’ supply and demand, democratizing the marketplace dynamics. Charts and graphs are also available to keep track of one’s portfolio development or general artist’s performance.

Lack of Art Market Knowledge

Although most investors do not have specialized knowledge about every stock in their portfolio, there is always public information available, as well as accessible guidance.

However, the art world is not as easily navigable, and until recently, it was fairly closed off to most collectors or investors. Art requires specialized and insider knowledge in order to avoid deception and risks of fraud.

25+ Years of Art Market Expertise

Our team is composed of both art market and finance professionals, who will offer their knowledge and expertise to the platform’s investors.

Weng Art Invest solely focuses on renown and blue-chip artists, who already have a proven and established secondary market. These artworks can therefore be treated as both collector’s items and/or as investment assets. Weng Art Invest team is always available to assist you and answer your questions.

Illiquidity

Selling an artwork might be a very lengthy and costly process, mostly involving the participation of third-parties such as auction houses, dealers or galleries. Transactions made via traditional sales channels will always require sale’s commissions and do not always guarantee that the artwork will be sold in a timely manner, nor at the expected price.

Immediate Liquidation

With Weng Art Invest, buying, selling and redeeming an artwork can be done directly on our platform. It is stress free and only one click away. Selling and redeeming your asset can be done via your personal portfolio on our platform.

Long Term Investment

Investing in artworks can be compared to investing in real estate or classic cars. These assets are highly costly and mostly illiquid, thus cannot easily be sold for quick cash. Similarly, the market for unique artworks by renowned artists might sometimes be static and require longer holding periods to achieve positive returns.

Short to Medium Term Investment

Weng Art Invest specializes in limited editions, which offer a much more liquid and dynamic market, thus allowing investors to hold on to their piece. With Weng Invest you can sell your token whenever you wish to do so via your personal portfolio on our platform.

Counterfeits

The art world is flooded with counterfeit items, frauds and uncertainties. In order to avoid these risks, it is crucial to do your research: check the provenance, get an expert’s opinion and obtain certificates of authenticity. This process can end up being very time consuming and expensive.

Impeccable Provenance & Condition

Our long-standing partnership with producers and manufacturers guarantees authenticity, provenance tracking, quality and conditions reports for all our limited editions. Thus avoiding any risks and additional costs.

High Entry Cost

The art industry is known to have a high barrier to entry. Blue-chip artworks often close auctions with million-dollar sale prices. Artworks sold by dealers have, according to Bloomberg, a median price of $10,000 — and for most investors, that’s simply too steep a minimum investment.

Low Entry Costs

Limited editions are original artworks produced in series. This peculiarity allows limited editions to have a much lower price point than unique artworks. Additionally, limited editions involve much lower maintenance costs.

High Dependence on Intermediaries

Artworks by blue-chip artists are not easy to get your hands on and investors might have to resort to intermediaries such as art dealers and auction houses – services accompanied by large costs.

For example, when buying at auction, you have to consider the buyer’s premium, which varies between 12-25% of the hammer price. Similarly, art dealers’ commissions range between 30-60% in the primary market and 5 to 20% on the secondary market.

Independent Trading

With Weng Art Invest selling is only one click away and does not involve any intermediaries. In your personal portfolio, select the asset you want to place back on the market and simply click “Sell Asset”.

You will then be redirected to the selling process and will be able to finalize your selling request. Should you have any doubts or questions, our team is always available to guide you through this process.

High Extra Costs

The intricacies involved in buying and collecting art, can be shocking for first-time buyers. In fact, there are many factors to consider when purchasing an artwork such as: transaction costs, taxes, artist resale fees, insurance, transport, installation, maintenance.

No Extra Costs

Investing in art with Weng Art Invest does not involve any hidden cost, nor any storing, selling or extra advisory costs.

Additional costs will only occur during the redemption process, to cover fees from our external partners for shipping and insurance.

“26% of art professionals claim that tokenization could become a key investment product for their clients.”

Source: Deloitte & ArtTactic: Art & Finance Report 7th Edition