Unobvious Investments

Since the beginning of 2021, art publications have literally flooded us with forecasts regarding the future of the art market, listing obvious events and vague prospects for the new season under the signatures of various authors (Artnet has even involved a professional fortuneteller for this reason — as a joke, but with a hint for the final outcome of such forecasts). The main conclusion of all the materials can be summed up in one phrase: if 2020 was a year of shock for the market, then 2021 will be the year of accepting this shock and further existence hand in hand with new realities. Nevertheless, we will also give our forecast, but, given the art-economic orientation of the publication, it will relate to new areas of investment.

So, what areas of investment in art, outlined during the previous season, have been developed in 2021 and will continue to gain popularity this fall?

• Expanding the portfolio: from pieces of art to art startups.

With the outbreak of the pandemic, startups at the intersection of art and technology have gone Cinderella's path, turning from a rogue art market into its favorites. Murakami, stored in stacks, and Giacometti, wrapped in plastic in the warehouse of a top gallery ceased to determine its status. The availability of a virtual office, payment systems, and visual presentation of art online come out on top. According to the most conservative estimates, young technological companies received more for the development in 2020 than in the previous three years. Overnight, large strategic investors from among the market players — collectors and large sellers — were added to investors in startups. In addition to direct investments into art, they began to invest into art startups. Besides the obvious technological superiority over competitors, this makes it possible for them to keep their hand in the art market: the current organizers of startups enter any online door and sometimes know about the state of affairs in art better than venerable functionaries. Investments in art technologies will be equally interesting for professional investors. From now on, to integrate into the world of art, it is not necessary to buy Basquiat for US$110 million: much more modest deals with art startups are now covered by the media with equal enthusiasm.

• Investment in young and active.

Until recently, most art investors were guided by public market data — in other words, statistics of auction sales results. Nobody wanted to take the private sales market in, due to its closed nature and the complex marketing moves of the players. Though it was in the heart of the private market, in the gallery-dealer environment, that the primary market was formed, i.e. young artists matured before theirstarting at the auction. Attempts to form indices that would streamline the primary market have over the years faced the impossibility of automatically searching and processing large amounts of data, information at the level of artist activities in social networks, or media reaction to an exhibition in a regional museum. When such computing capacities and technologies for translating this information into market figures appeared (naturally, as well as the expected figures for subsequent sales — how could we manage without them), art investors have got a mechanism for predicting the future of young artists without an auction history. The Phillips auction house was one of the first to adopt thistechnology, having announced a partnership with such a startup as Articker. In the meantime, the changing taste priorities of collectors in 2020 turned their interest towards young art. Although from now on, the desire to find new Richter and Basquiat among the young creative cosmopolitans has beenalso supported by figures, which should give a positive effect with benefits for both parties, as a result.

• Investments in the careers of artists.

From investing in items we move to investing in careers. Art producing is a new trend, which Anders Petterson casually announced last summer at a webinar from ArtTactic, speaking about the interests of the youngest segment of investors, Generation Z. The similarity of the author's career growth with the development of the hero of video games, on which the present Z-investors have been brought up, as well as the desire to control any process in which their money is invested makes this area perhaps the most promising among art investments at the primary art market. In addition, investing into the careers of artists has an undeniable argument in favor: acquiring individual works through a gallery or in a workshop, the investor has no guarantee that the invested money will be of any use for the artist — for instance, the gallery can distribute them among several authors, and the artist can also use it inappropriately for amusement purposes. Now it is the turn of the platforms that will provide Generation Z with a detailed mechanism, moderately playful, but very elaborate and down-to-earth. As far as Fuelarts is aware, such developments were carried out throughout 2020 and are going to appear in the nearest future.

• Investments in some others’ risks.

The latest, fourth trend of 2021, is the development of derivative financial instruments based on art investments — first of all, auction guarantees, resale of liabilities for debts and trading various art derivatives. Summing it up, they can be called "games for adults". Unlike the above paragraphs, these tools are in demand among bored, experienced investors. The restrictions caused by the pandemic have only raised investment boredom many times.

"And where is the traditional art investment - buying art at a lower price with the aim of reselling it for a higher one? — you would ask. — Why have they not been included in the trends?" Because market trends are innovations, we would answer. And direct, obvious investments into art have always existed and will always exist.