“Blue chip” is a term used to describe established companies whose value is a certainty. In the same vein, blue-chip art refers to the works of the most important and recognizable artists, whose pieces consistently sell in volume and at high prices. Blue-chip art is not acquired on a speculative basis – the art market is fairly volatile and artists can fall out of favor quickly. These artworks normally carry a six-to-eight digit price tag and have a well-established collector base, which guarantees that they will retain – or grow – in value.
Top-selling blue-chip artists and markets
Some of the best-known and most valuable blue-chip artists include Pablo Picasso, Jean-Michel Basquiat, Keith Haring and Andy Warhol, names which are well-established and globally recognized. In 2021, the three largest art markets – the U.S., Greater China, and the U.K. – account for the bulk of sales, with a combined share of 80 per cent. The U.S. was in the lead, with sales increasing by 33 per cent to more than $28bn, according to The Art Basel and UBS Global Art Market Report, compiled by Dr Clare McAndrew. Art market reports indicate that Picasso was the top-selling artist in 2021, with 3,452 lots sold and auction revenue of $671,513,270, closely followed by Basquiat, with auction revenues of $439,339,428.
Although of course not immune to risk, prices in this category are fairly resilient and rebound quickly – blue-chip art was one of the assets least affected by the 2009 financial crisis. What’s more, art market analysis shows that work by top blue-chip artists has seen a vast increase in value in the past two decades, outperforming the S&P500 (the stock market index that tracks the performance of 500 large companies listed in the U.S., published by the credit rating agency, Standard and Poor) by more than 250 percent. For instance, “Woman Sitting” (“Femme Assise”), an early Cubist work by Picasso, was bought in 1974 for $486,000. The painting fetched $63.4m at Sotheby’s in London in 2016. Even with adjustments for inflation over this period, this is a significant increase.
Despite the global pandemic, the global art market’s performance in 2021 was unprecedented. There was a 60 percent increase in auction turnover in 2021 versus 2020, with the success of live online sales meaning that in-person sales could soon become redundant. By quickly adopting digital technology, the art market weathered the storm of the pandemic and bounced back stronger than ever.
The list of best-performing artists is dominated by modern artists, followed by post-war artists, contemporary artists, 19th-century artists and very few old masters. Investments in modern artists carry the least risk as demand for their work continues to grow, offering attractive returns over the long term. And the art market is buoyant: this past year has seen a significant rise in turnover and revenue in fine-art sales and the number of lots exchanged at auctions globally reached an all-time high of 663,900, up by 29 percent.
Not to be overlooked is the phenomenon of NFTs, which offer a whole new way of collecting, while young artists (the so-called “red-chip” phenomenon), such as Beeple, Avery Singer and Fewocious (who is just 18 years old) sell for extraordinary prices at auction. Their work offers significant returns in the medium and short term – but carries far more investment risk. Despite this, according to a survey of art buyers carried out by the insurer, Hiscox, 41 percent have said that they had bought new media art online in 2021, up from 17 percent in 2020. “NFT trading has been frenzied and dramatic with all the hallmarks of a classic investment bubble,” said Robert Read, Head of Fine Art at Hiscox. “Some will no doubt make a fortune while many will end up shedding a tear before the market settles, but this is definitely one space to watch.”
To facilitate collector access to this emerging market, Invaluable has recently squired Swiss technology company Artmyn, which has created a platform for digital authentication and immersive experiences for collectors of fine art. Artmyn technology will also provide collectors with access to blockchains and NFTs.
How to invest in blue-chip art
Blue-chip art is one of the most stable assets in a portfolio. But whether high-net-worth individuals (people with investable assets of at least $30M) make the investment for the joy of ownership, capital appreciation or portfolio diversification depends entirely on personal motivations. As the best-performing artists consistently outperform the S&P500, the financial long-term gains are clear; however, the additional costs of owning blue-chip art, such as storage, must be taken into account. It is also worth noting that it can be tricky to make quick profits on blue-chip art because it is a highly illiquid asset class and resale is rarely without transaction costs.
Apart from traditional auction houses such as Sotheby’s and Christie’s, alternative investing platforms have recently emerged to democratize proceedings. These platforms allow investors to participate in the art market in a flexible way.
Companies such as Masterworks, Otis (for contemporary art and NFTs) and ARTBnk offer the opportunity to acquire shares in artworks or in whole collections, which they then store for a fee. Masterworks, for instance, allows people to make investments in $20 increments – so a very small piece of a Picasso or a Warhol can become within reach. The company analyzes data to make an educated guess about which artists and artworks are likely to grow in value over time. ARTBnk specialises in this type of “fractional ownership” – the purchase of fractional interests in important works of art, giving you shared benefits and rights, and reduced risks.
These digital platforms offer the opportunity to buy and resell shares at any time. This has the distinct advantage of not needing to engage in a drawn-out process of reselling a unique work in the best place and at the best time, thus rendering the liquidation of assets and profit making much easier.
Is blue-chip art a good investment?
Whether blue-chip art is a good investment depends on personal circumstances and the investor’s comfort levels when it comes to risk. Despite works by the top 100 artists selling extremely well, the art market can be volatile and at times fickle. Betting on an artist retaining their star status is always a gamble. Doing thorough research or seeking professional help is key in order to invest in the right piece – and at the right time. Whether you have millions to invest or not, the advent of digital platforms has democratized blue-chip art ownership, letting many more invest in pieces that are likely to bring in steady returns.