Millennials: “Art is an investment”

KAWS, 'THE KAWS ALBUM', 2005, painting. Sotheby's; NIGOLDENEYE® Vol. 1.

There has been extensive media coverage recently on millennials, their personal brands, and how they are choosing to spend their time and money.  While social media and technology have dramatically impacted millennials’ lifestyles, these developments have also helped contribute to millennials becoming increasingly involved in the art market, specifically as investors.  In a new Business Insider article titled, “Forget real estate — ‘art flipping’ is the latest way rich millennials are building wealth, and it’s an investment baby boomers largely ignored,” millennials are highlighted as active collectors, who do not shy away from simultaneously treating art as an investment.  Despite the tendencies of the previous generation of Baby Boomers to invest in more traditional assets, the younger generation generally views art as a bona fide alternative asset and many are considering strategically allocating a portion of their growing wealth to art.  

The article continues:

“[millennials are] more likely than other generations to contemplate a work’s value and the overall market rather than [solely] the aesthetics of the piece before deciding to buy.”

While it seems that young art collectors do still consider the beauty of an artwork and the connection to self, they are also drawn to art for the potential financial gains it can bestow on the buyers.  Those born between 1981 and 1996 are estimated to account for roughly a quarter of all active art collectors. Whereas previous generations of art collectors would most often take pride in holding the works they purchase for decades, today’s new collectors are making a name for themselves in “flipping art,” where they buy a work and sell it within a relatively short timespan to realize a quick profit.

The idea that younger collectors today are using art to build wealth has become a hot topic for research as well. A recently published piece by Art Market Guru, titled “How Millennials Are Changing The Art World,” noted that young art collectors are extremely cognizant of the dynamics of art as an advanced wealth-building strategy. Not only are new collectors acquiring art for investment purposes, but they are using new (by art world standards) technology platforms to source and sell art in the $100,000 to $1MM price range online.  These new venues are providing additional transparency and liquidity in the art world, and have empowered younger, more strategic investors.

In some cases, millennials may inherit art collections from their family, but millennials are increasingly likely to purchase art as a means of investing.  The younger generation strongly feels that art is a financial asset that can be leveraged to build wealth. This view, coupled with new technology platforms, has increased exposure and involvement for young art collectors and investors.  Based on a handful of reports published by trusted news outlets, a large percentage of millennials indicate they plan to allocate some capital to this increasingly compelling asset class and strongly feel that art is an investment.


Business Insider: Forget real estate – ‘art flipping’ is the latest way rich millennials are building wealth, and it’s an investment baby boomers largely ignored

Bank of America: 2018 Insights on Wealth and Worth — Art Collectors

Art Market Guru: How Millennials Are Changing The Art World

Bloomberg: That $100,000 Painting Bought to Flip Is Now Worth About $20,000

The New York Times: Barbarians at the Art Auction Gates: Not to Worry

Sotheby’s; NIGOLDENEYE® Vol. 1

[1] Art Market Guru: How Millennials Are Changing The Art World; August 3rd, 2018: “Young art collectors comprise around a quarter of all collectors: a 2018 article from insurance company AXA estimated that 15-25% of collectors are young, while the 2018 S. Trust Insights on Wealth and Worth study found that 27% of its respondents were millennials.”

[2] Bloomberg; The New York Times; Bank of America; Art Market Guru.  All sources above.



Gregory Budetti – Registered Representative

A registered representative of SDDco Brokerage Advisors, LLC  MEMBER: FINRA / SIPC 485 Madison Ave 15th Fl New York, NY 10022 t-212-751-4424 (“SDDco-BA”). and its affiliates and other related parties, and SDDco-BA are independent, unaffiliated entities.


Jamie Dimon Annual Letter to Shareholders

Claude Monet, 'La Seine à Lavacourt,' 1879, oil on canvas. Christie's; The Collection of Peggy and David Rockefeller.

Thursday morning, Jamie Dimon of J.P. Morgan published his annual Chairman & CEO Letter to Shareholders.  In this highly anticipated letter, not only did Dimon recap the previous year for all J.P. Morgan shareholders, but he also expressed his views on the current state of the global economy. Although the stock market has continued to climb to new highs in the first half of 2019, in the letter, Dimon cautioned shareholders not to forget last year’s performance, specifically the extremely volatile 4th Quarter. Despite hitting an all time record close in October, for 2018, the Dow Jones Industrial Average returned -3.48% and the S&P 500 Index returned -4.38% (both figures including dividend reinvestment). The sharp sell off in the stock market and subsequent period of uncertainty marked the first decline in global stocks since 2011, and Dimon states that this “might be a harbinger of things to come.”

He expands:

“But in the fourth quarter, growth slowed in Germany; Italy repudiated European Union rules; Brexit uncertainty remained; and fear spiked around America’s trade issues with China. Among other geopolitical tensions, the U.S. government shutdown began. In addition, more questions arose about interest rate increases in the United States and the effect of the reversal of unprecedented quantitative easing, particularly in this country.”

As potential reasons for concern, Dimon cited many economic uncertainties, potential sources of instability and volatility in the near term.  The International Monetary Fund and The World Bank seem to agree that current market conditions point to an economic slowdown. With the recent record highs in the stock market, investors must ask themselves some tough questions:  is it time to realize some of my gains? How much should I be protecting toward a correction or future sell off? Should I rebalance my portfolio? In times of uncertainty, investors often rethink their approach to the market and the level of portfolio risk they are able to assume

So, for those investors who wish to diversify their portfolio, there are several alternative and hard assets available, such as gold, cryptocurrency, real estate, and art.  More specifically, art has become increasingly interesting when included in a well-balanced, global portfolio. Art may offer attractive, uncorrelated, risk-adjusted returns and may also enhance strategic asset allocation. Blue-chip art has averaged returns of +8.9% per year since the year 2000, and historically has acted as a natural hedge against cross-currency movements.  One of the country’s most well respected banker’s is suggesting continued economic stress on a global scale, and Dimon’s letter indicates it may be time to reevaluate optimal portfolio allocations and understand all alternative investment options.

For continued reading, please refer to our article:  What Happens to Art in a Financial Crisis?


Jamie Dimon’s Letter to Shareholders, Annual Report 2018

International Monetary Fund World Economic Outlook Update, January 2019

The World Bank: Global Economic Prospects


Christie’s: The Collection of Peggy and David Rockefeller: 19th and 20th Century Art, Evening Sale

[1] “Blue-chip art” defined by the Artprice100® Index of the top 100 artists, such as Monet, Warhol, Picasso and more.



Gregory Budetti – Registered Representative

A registered representative of SDDco Brokerage Advisors, LLC  MEMBER: FINRA / SIPC 485 Madison Ave 15th Fl New York, NY 10022 t-212-751-4424 (“SDDco-BA”). and its affiliates and other related parties, and SDDco-BA are independent, unaffiliated entities.


Art Basel and UBS Annual Art Market Report 2019

The long-standing annual report on the state of the global art market was released a few days ago. Economist Clare McAndrew and team estimated total sales grew 6% year over year to $67.4 billion: its second highest level in the last decade. Roughly 43% of the value in the market was realized through sales at public auction, which totalled to $29.1 billion last year.

High value artworks benefited disproportionately from growth in the auction market. Works priced over $1 million dollars increased in value by 13% and accounted for 61% of total sales, while representing fewer than 1% of objects sold.

Post-War and Contemporary art continued to dominate other collecting categories in 2018 and drove $7.2 billion in auction sales, up 16% from 2017, despite a 5% decrease in the number of lots sold.

The Art Market 2019

The Auction that Changed the Contemporary Art Market: The Scull Sale of 1973

Andy Warhol, ‘Ethel Scull 36 Times’, 1963, silk screen. Copyright The Andy Warhol Foundation for the Visual Arts, Inc.

In today’s world, where individual paintings sell for tens of millions of dollars, the Scull sale total of $2.3 million for 50 works—or $12.7 million in 2019 dollars—would hardly be newsworthy. However,  in 1973, it wasn’t a given that art could provide collectors with a sizable return, and certainly, not 100 times a work’s purchase price.

Now, it is widely accepted that the Scull auction launched the bullish market for Contemporary American art, driven, like any other industry, by marketing and publicity.

Ethel and Andy Warhol in front of his first commissioned portrait, Ethel Scull 36 Times, 1963

Who were the Sculls?

Despite his humble beginnings as a child of Russian immigrants, Robert Scull became wildly successful by operating a New York City taxi fleet which he had inherited from his wife, Ethel’s, father. The lucrative business allowed Robert and Ethel Scull to enjoy a life of glamorous parties and pursue their passion for collecting art. The couple befriended many artists and became well known within the small New York art scene of the 50s and 60s. As patrons, they would go out of their way to support young artists at a time when few others were interested in contemporary art, even buying up entire shows from legendary art dealer Leo Castelli.

The Ascent of Pop Art

Though Pop Art had become widely recognized by the 70s, few people knew how to access the insular New York art world. The community had been tightly knit, with collectors often buying directly from artists or a handful of well-respected dealers. Robert Scull realized that he could make a profit and simultaneously use the publicity of an auction to raise his social profile by orchestrating a sale where virtually anyone with sufficient funds could purchase previously inaccessible tokens of contemporary culture. Paired with Sotheby’s high-budget promotion of the sale, including a lavish catalogue and tour of the collection to Europe, the stunning demand created the first blockbuster auction of Post-War and Contemporary art.

Extraordinary Returns on Contemporary Art

Highlights from the Sale: Where Are They Now?

Many of the works auctioned that October went on to have well documented futures. Among them, Willem de Kooning’s Police Gazette, 1955, bought for $180,000 at the sale changed hands between several notable collectors; at some point the renowned gallerist Bill Acquavella acquired it for $2.2 million, then resold eventually to hotel mogul, Steve Wynn for $12 million. The work is now in the hands of hedge fund billionaire Steven M. Cohen, who bought it from Dreamworks founder David Geffen for a reported $63.5 million in 2006. All told, the painting appreciated more than 350 times, an average of 19.5% per year, in the 33 years since the Scull sale!

Willem de Kooning’s Police Gazette, 1955

Other works from the Scull auction have found their way into public institutions. Among them, Jasper John’s Target was recently donated by Stefan Edlis and Gael Neeson to the Chicago Institute of Art. In the recent documentary, The Price of Everything, Edlis estimated that the painting which sold for $125,000 in 1973, should now be worth around $100 million dollars. Edlis, himself, acquired the painting for $10 million in 1997.

The Best Investments of 2018? Art, Wine and Cars

In times of high market volatility and economic uncertainty, alternative and hard assets become increasingly appealing to investors. To better understand the options available for investors to round out their portfolios, we looked at the most recent numbers around returns from art investing and the future outlook for this asset class compared to other potential investments.

Art Prices in 2018, according to the Wall Street Journal

At the end of 2018, the Wall Street Journal asked: What were the best investments of the year?

David Hockney working on Portrait of an Artist (Pool with Two Figures) (1972) which sold for $90.3 million in November. The previous auction record for his work had been $11.7 million.
(Photo: Jack Hazan / Buzzy Enterprises Ltd.)

As it turns out, the answer is… luxury collectibles! Art and Wine appeared to be the clear winners, ahead of classic cars, bonds, gold and global equities. The WSJ reported that “investors who put money into art at the beginning of the year saw an average gain of 10.6% by the end of November.” In the same time period, the S&P 500 was down 5.1%. As a result, those who diversified their portfolio with collectibles were able to offset losses in the financial markets with stable gains on other investments, and their economics were better than had they not invested in art, for example.

Year to Date Performance

A closer look: Art compared to 6 major asset classes.

In thinking about how to allocate among asset classes, investors take into account more than just the projected growth rates. Other important characteristics that must be weighed include an asset’s liquidity, whether or not it provides passive income, its riskiness and volatility, the minimum requisite investment and the correlation it exhibits with other asset classes.

While 2018 performance speaks volumes about why art has become popular with ultra-high-net-worth investors, we wanted to put together a more comprehensive illustration of how art price growth projections compare to more traditional assets. In order to do so, we relied on research by Citigroup, Callan, Mei Moses and other leading sources to compile an easily digestible summary.

Masterworks Compared to Other Asset Classes

Art appears to be less volatile than Real Estate, Private Equity and the S&P 500, while price appreciation is expected to exceed growth in all six of the listed asset classes over the next ten years. Moreover, with Masterworks, the minimum investment in Art has become one of the lowest among alternative assets.


1. Callan, 10-Year Projections, 2018 – 2017

2. Deloitte, and ArtTactic Art & Finance Report, 2016

3. World Gold Council, website accessed Jan 7, 2019

4. Citi GPS, Global Art Market Report, 2015, US Fixed Income used for Investment Grade Debt statistics

Do you know which time periods in art history have the best financial performance?

Investing in art is a highly nuanced undertaking, and the market for certain types of art or specific artists can vary greatly. As a rule of thumb, art is grouped into periods or artistic movements, often with a consideration for tradition or geography, such as Asian Contemporary Art, Post-war, Contemporary, Impressionist, Modern and more. So how should someone think about returns based on segments of the market?

Stock market research often groups companies based on sector.

Equities analysts often report performance by sector: tech, healthcare, financials, retail, energy. They do this in order to paint a more accurate picture of the stock market, because market ups or downs can often be driven by a specific type of stocks. Most recently we saw this in the bull (then bear) market for technology stocks.

And while you can’t predict the returns for an individual company’s stock based solely on such information, it provides a basis for understanding the underlying forces that drive prices.

The same kind of thinking can be applied to art.

Simply put, the global art market has “collecting categories” which can be thought of as sectors. The categories are broadly defined to encapsulate a particular artistic period and one or more related styles within that time frame. Though due to the subjective nature of art itself, the definitions may change depending on the auction house or reporting entity.

It is generally accepted that the four largest collecting categories are:

  1. Post-war and Contemporary: works created after 1945 through the present
  2. Impressionist and Modern Art: works created in the late 19th century through 1945
  3. Old Masters and 19th Century: European works of art principally created after the 12th century and before the third quarter of the 19th century
  4. Traditional Chinese Works: created anywhere from the mid 1950s back to the first millennium

Performance by period.

When we take a closer look at the data, it becomes apparent that the risk-reward profiles are not uniform across collecting categories. Below is a summary of the performance of the four aforementioned collecting categories as compared to the total returns of the S&P 500 in the same time period.

All of the categories mentioned exhibited less volatility than the leading stock market index, and two of the four beat the total returns. Moreover, Post-war and Contemporary and Traditional Chinese art prices, segments with the highest average appreciation, were negatively correlated with the S&P 500 index.

With its low volatility, Impressionist and Modern art proved to have the most stable price appreciation, likely due to the number of high quality works still held in private hands and relative frequency of transactions, which allow buyers to ‘mark to market’ their holdings and have a higher degree of certainty around pricing. The Old Masters category, meanwhile, seems to have stagnated over the last twenty years, in large part due to changing tastes and the absorption of most surviving masterpieces into museum collections.

So where do you invest?

Aesthetics aside, an investment minded buyer should focus on the segment that provides the risk-adjusted return best suited to their financial goals. In order to help illustrate how one might think about factoring that into their decision making process, we have calculated the Sharpe Ratio for each of the four collecting categories using the 10-Year Treasury Note as the risk-free rate for the basis of the comparison.

The calculation allows us to think about how each collecting category might be ranked based on its risk-reward profile. In order of highest to lowest Sharpe Ratio, the collecting categories ranked as follows: Post-war and Contemporary (.49), Traditional Chinese (.25), Impressionist and Modern (.07), and lastly, Old Masters (-.24). With a negative value, the Old Masters category can be thought of as an investment that is not worth making for any number of reasons, and most clearly, because the risk-free rate exceeds the likely return, .

While the Post-war and Contemporary category exhibits the highest rates of return, it is also much riskier than Impressionist and Modern art: the return is just over 2 times higher, while the risk is approximately 50% higher.  Therefore, unless you are very conservative or are able to buy an Impressionist and Modern work at a significant discount from the fair-market value, Post-war and Contemporary provides the best risk-adjusted returns.

Both the name of the artist and the aesthetics of the work matter.

Sure, Vincent Van Gogh was not understood in his own time and his paintings later sold for record prices. However, one might say that he is the exception, not the rule. Most artists who consistently lead the aforementioned collecting categories were fully ingrained in an artistic movement and gained prominence in their own lifetime.

Jackson Pollock’s Number 16, 1949 sold for $32,645,000 in 2013.

That being said, picking an artist who has staying power is only half the battle. While the name carries great weight in the art market, the properties of the work itself are incredibly significant. In order for the work to continue to appeal to as many collectors as possible, it must be in the mature or signature style of the artist. While the an iconic work by Jackson Pollock in his signature ‘drip’ style can earn tens of millions of dollars at auction these days, for example, his surrealist paintings, even from the same time period, sell for a fraction of that price.

Note: Other categories include: American Art, Latin American Art, Asian Contemporary, etc. however for simplicity we are focusing on the four largest departments.

* Deloitte & ArtTactic Art Market 2016 Report, p. 106

** As measured by the standard deviation

*** The Sharpe Ratio presented is an annualized 20-year return less the return on a 10-year T-note divided by the 1-year standard deviation of annual returns.

How to invest in art if your budget is $10,000 or less

Invest in Fine Art with less than $10000 -

Fine art has exhibited strong risk-adjusted returns, while remaining relatively uncorrelated with other major asset classes. But if you have a limited amount to invest, say $10,000, what are your options? Below, we break down the possibilities to help our readers make an informed decision about investing in art and how Masterworks is changing the industry.

What you can acquire with $10,000 or less:

An original artwork by a lesser-known artist

Paintings or sculptures in the $10,000 and under range are typically by artists who have not gained significant traction in the mainstream market. As such, their works do not have a reliable secondary market and the inherent track record to help asses resale value. These works would typically be purchased from a gallery or directly from the artist.

Judith Seligson, “Gulet”, 2012, Oil on panel, available for $10,000 - Learn to invest in fine art with
Judith Seligson, “Gulet”, 2012, Oil on panel, available for $10,000

The most difficult aspect of buying an original work in this price range is sifting through the multitude of emerging artists, where little to no prior sales data is available because the works are offered privately. Therefore, the buyer must carefully research the artist’s prior exhibitions, awards, and collectors, both institutional and private, to understand their potential and how they stack up against similarly priced peers.

Risk Reward Profile

The chances that a $10,000 painting will increase in value are relatively low, so finding one that becomes the next million-dollar sale is on par with the odds of winning the lottery. As an investment, therefore, this category is extremely high-risk and speculative. Additionally, if you are buying a single piece for investment purposes, your art holdings are completely undiversified, which makes the odds of having a golden ticket even lower.

A print edition by a well-known artist

Collectible prints or multiples run in limited editions which can range from a series of two or three to a run of thousands. While this is an affordable way to own something by a well-known artist, the prospective acquisition must be thoroughly researched to ensure that you are paying a fair price and the print is rare enough that it has scarcity value.


Editions can be tricky to research, because their ownership history, or provenance, can be difficult or impossible to establish, even when buying through public auction or a reputable gallery. In order to estimate the value of a print and its prospects for future appreciation, due diligence must be performed to assess past results for similar pieces by the artist. Additionally, since you will not be the first owner of the work, you need to ensure that it is in excellent condition, so that your investment is secure.

Risk Reward Profile

The prices of editions remain fairly stable, because they trade with relative frequency in the market. According to a research paper published by University of Toronto Economist, Dr. James Pesando, in the 25 years of sales he tracked, modern prints had a real, or inflation adjusted, return of approximately 1.5% on an annualized basis.

Fractional Ownership of works by Blue-Chip artists

Masterworks seeks to become the first company to allow investors to purchase shares in investment-grade art and simplify the process for diversifying portfolios with an alternative asset. In order to do so, Masterworks acquires ‘blue-chip’ artworks from the major auction houses, with a focus on those representative of an established artist’s mature style. As a result, with $10,000 an investor will have the ability to build a diversified portfolio of sought after objects by buying shares of several multi-million-dollar artworks.

Learn to invest in fine art. You can own shares of this Andy Warhol, “1 Colored Marilyn (Reversal Series)”, 1979, available at Masterworks
Andy Warhol, “1 Colored Marilyn (Reversal Series)”, 1979, available at Masterworks

Industry experts at Masterworks conduct all of the relevant research and only acquire works which meet a specific set of criteria.  The offerings are then filed with the Securities and Exchange Commission and the documents are made available to investors online. Currently, 1 Colored Marilyn (Reversal Series) by Andy Warhol and Coup de vent by Claude Monet are awaiting qualification by the SEC.

Risk Reward Profile

For an artwork to meet Masterworks’ acquisition criteria, there must be enough publicly available auction sales records for similar objects to gauge Fair Market Value and historical appreciation. Accordingly, only those works which have an estimated price accretion between 9-15%, annually, are targeted. In this way, Masterworks seeks to optimize the risk-reward profile for investors, while ensuring that the price paid for a work is at or below Fair Market Value.

In short, while some have the skills and knowledge to acquire individual pieces, others may find that it is demanding and inefficient, not to mention the additional hassle of setting up tax-efficient vehicles, arranging for insurance, storage and deciding how and when to liquidate the investment. To radically simplify the process, Masterworks has created a new platform that allows investors to purchase a diversified portfolio of shares in blue-chip art with the click of a mouse.

Deloitte’s Art & Finance Report

Deloitte's Art & Finance Report - Masterworks Invest in Fine Art

Together with Arttactic, Deloitte publishes an annual report that summarizes trends in art finance and the art market more broadly*. As the intersection of art and finance grows, so does the need to quantify shifts in the market. The Art & Finance report provides collectors, consultants, and researchers, alike, with valuable survey statistics and original research.

Deloitte’s 2016 report was the last to publish the Mei-Moses art price index, considered to be an industry benchmark for art prices, which has since been acquired by Sotheby’s. A summary of the results can be found below or on page 104.

** Risk as measured by the reported Standard Deviation.

Section 4 of the 2017 publication will prove most useful for those considering an investment in Art. The report covers a range of information, including an overview of art investment funds and wealth management surveys.

* While Deloitte did release a 2018 report, it was only published in Italian. In the absence of major shifts in the world of art and finance in the interceding year, the 2017 report should provide readers with valuable and still relevant information.

Deloitte Art & Finance Report 2016

Deloitte Art & Finance Report 2017

Morgan Stanley’s Primer on Art as an Asset

Deloitte's Art & Finance Report - Masterworks Invest in Fine Art

Morgan Stanley launched the Blue Rider Group in 2015 to support its growing base of high-net-worth clients who collect art. The group’s aim is to integrate art, an increasingly popular asset class, into a holistic approach to wealth management. Fans of German Expressionism will instantly pick up on the nod to Der Blaue Reiter in the name, but for those who are just starting to learn about art and the market, the team at Morgan Stanley published a helpful overview of art as an asset.

The information is useful for those who are curious about the major players in the art market and the high-level concerns that a collector-investor would take into account for fine art as part of their overall wealth portfolio. Though the report provides little guidance around specific investments or strategies, it does outline considerations specific to fine art, such as tax strategies and insurance needs. You can find the publication below.

Art as an Asset 2017

Barclays Wealth Insights Report

Barclays Wealth Insights Report - Invest in Fine Art with

Barclays global research group releases periodic reports on specific topics relevant to wealth management. The authors survey roughly 2000 high net worth and ultra-high net worth individuals and combine their insights with research from a panel of experts, drawn from academia, industry and financial circles.

The fifteenth volume of the Wealth Insights series covers collectible assets, including jewelry, fine art and antiques, as alternative investments. The report provides an overview of the financial and emotional motivations for holding find art, in the context of an individual’s total wealth, and analyzes the shifting demographics and preferences of collectors. The included research skews towards uncovering the perception individuals have around art and other hard assets rather than understanding financial outcomes.

Barclays Wealth Insights: Volume 15