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If you look at the global data, contemporary art as an investment has outperformed the S&P 500 over the last 25 years. Contemporary art has offered an annual return of 14% over the last 25 years, as of December 2020, versus a 9.5% annual return from the S&P 500, according to the Citi Global Art Market chart.
There are several different ways to invest in the space, First of all, investors can simply buy a work of contemporary art — although this can be tricky as buyers either have to bet on unknown artists, or pay dearly for a more established name, Art funds are another option but there are no such funds available for art in the country. Investors can also buy shares in companies that provide information on the art market and sell works online. However, these companies “face very strong competition”, which, among other things, explains their sharp declines.
The democratization of fine art has been a longstanding goal in the art world, and recent advancements in technology, particularly the emergence of non-fungible tokens (NFTs) and blockchain, have opened up new possibilities.
Startups have played a vital role in driving the adoption of NFTs and blockchain technology in the art world. They have developed innovative platforms and marketplaces that connect artists and investors, making it easier for both parties to navigate the digital art space. While in the field of traditional fine art the idea is still taking shape, Artfi is making fine art collecting and investment easy for everyone.
“Art is a multi-faceted asset that we focus on from its financial perspective. Our sincere intention is to provide a transparent platform for the global audience to invest in art and enjoy its warmth,” says Asif Kamal, Founder and CEO, Artfi.
His argument in favour of the asset class includes the fact that contemporary art has seen fewer periods of losses than global equities, gold and the U.S. housing market.
Kamal also points out that art has a low correlation to more traditional investments, meaning it is unlikely to rise and fall with those assets so it’s a unique investment and you have minimum losses — if you choose the right one of course. And because it’s a real asset, it can offer a level of protection against the risk of rising inflation, Asif added, which is something that has been a major concern for investors of late.
Using NFT as a technology that enables tokenisation and fractionalisation of real world assets is a game changing approach that enables larger audience to participate in their choice of asset class at affordable price. NFTs also empower beginning investors by providing them with access to a wider range of artworks. Unlike traditional art investments, which often require substantial capital, NFTs allow investors to buy fractional ownership or even just enjoy the digital representation of the art or share of the artwork that represent ownership in the underlying asset, lowers the barrier to entry, making it more liquid, more tradable, sharable and easier for individuals to invest in fine art and potentially benefit from the appreciation in value.
This is also enabling artists and creators to directly sell their work to a global audience without the need for intermediaries like galleries or auction houses. This allows artists to retain more control over their creations and receive a fair share of the profits and get massive exposure for their artworks.
Overall, blockchain technology has several advantages that benefit both artists and investors. It enables transparent and tamper-proof records of ownership, provenance, and transaction history, which helps establish the authenticity and value of artworks. Investors can verify the origin and ownership history of a piece before making a purchase, reducing the risk of buying counterfeit or stolen art.
Blockchain also facilitates a decentralized marketplace where artists and investors can directly engage with each other, eliminating the need for intermediaries. This peer-to-peer approach fosters a more inclusive and accessible art ecosystem, as it allows artists from diverse backgrounds to showcase their work and investors of all levels to participate in the market.
In conclusion, NFTs, blockchain technology, and startups collectively contribute to the democratization of fine art. By removing barriers to entry, providing transparency, and creating accessible platforms, these advancements have empowered beginning investors to participate in the art market and support artists directly. While challenges and complexities still exist, the ongoing development of these technologies and the efforts of startups continue to shape a more inclusive and diverse art ecosystem.