Elon Musk’s investments in AI have already netted him billions, but another, more traditional asset class is gaining traction. This year, AI provided a significant, albeit potentially fleeting, boost to the stock market, especially benefiting tech giants like Nvidia and Google.
However, amid the hype surrounding AI companies, Elon Musk is turning his attention to a more established segment of the market. He’s not alone in this shift; recently, the Rothschilds sold this asset to the Dutch government for over $197 million, while Oprah Winfrey sold the same asset for $150 million, earning $62 million in profit. Jeff Bezos also joined the trend by investing $70 million in this asset class: fine art.
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There are compelling reasons why 73% of ultra-high-net-worth Americans, as surveyed by UBS, are considering art as a diversification strategy:
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Blue-chip art prices have appreciated 11.5% annualized (1995-2023).
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Contemporary art has outpaced the S&P 500 by 64% over the past 28 years.
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Art has outperformed gold and stocks during past inflationary periods (1973-81).
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Masterworks’ 23 exits have returned a profit to investors, totaling more than $60M in payouts.
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From past offerings, investors secured 20%, 31%, and 32% total net returns, among others.
Contrary to popular belief that investing in fine art by renowned artists like Picasso, Basquiat, and Condo requires substantial wealth, platforms like Masterworks allow investors to purchase shares representing partial ownership of artworks. This democratizes access to an asset class that celebrities such as Brad Pitt, Leonardo DiCaprio, and Beyoncé have also embraced, at a fraction of the cost of owning an entire piece of art.
The Art Market Continues to Deliver Impressive Returns to Investors
According to the UBS Billionaires Report of 2023, a significant portion of ultrawealthy collectors intend to maintain or increase their art investments in the latter half of 2023 and into 2024, consistent with previous years. Confidence remains high, with 77% of surveyed collectors expressing optimism about the art market’s performance over the next six months, underscoring its resilience. Additionally, Deloitte reports the total value of privately held art and collectibles at an estimated $2.1 trillion. According to the Masterworks all art index, contemporary art has outpaced the S&P 500 by 64% from 1995-2023.
Citi’s findings reveal that even a modest allocation of 5% to contemporary art can significantly enhance long-term portfolio performance in nearly all cases. Despite these compelling statistics, many portfolios predominantly consist of stocks and bonds, largely due to the perceived complexity and high cost associated with art investments.
Everyday Investors Can See Soaring Returns Too
Participating in the art market at scale remains financially prohibitive for most investors. However, platforms like Masterworks are democratizing access to multimillion-dollar artworks by renowned artists such as Banksy and Picasso. With 21 successful exits, Masterworks has achieved impressive annualized net returns ranging from 14.6% to 36.2%. For those looking to emulate billionaire art investors, Masterworks represents a pivotal gateway into the art investment landscape. The company was founded in 2017 by internet entrepreneur and art collector Scott Lynn with the mission to “make art investable”. As of 2024, Masterworks is valued at over $1 billion and is one the largest art buyers in the world with over $700M of artwork acquired. Deloitte reports the total value of privately held art and collectibles at an estimated $2.1 trillion. According to the Masterworks all art index, contemporary art has outpaced the S&P 500 by 64% from 1995-2023.
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