What the May Auctions Revealed About Art as an Asset Class | Artnet News

Number 7A (1948) from Jackson Pollock’s work sold for $181 million, after being bought for $32 million in 2000. Over 26 years, the annualized return is estimated at about 6.6%, excluding carrying costs such as insurance. A passive investment in the S&P 500 with dividends reinvested would have grown to about $240 million, offering greater liquidity and lower costs. The painting is described as exceptional in quality and provenance, being an early and large drip painting. Even so, the results are framed as sobering because the Pollock appears to have underperformed a basic index fund, and other recent New York sales show similar patterns. Advice emphasizes buying art for love rather than investment potential, calling art purchases a gamble.

"Newhouse bought Number 7A for $32 million in a private transaction in 2000, according to Alex Rotter, Christie's global president. Over 26 years, the annualized return for the Pollock comes to about 6.6 percent, not including carrying costs like insurance. Over the same period, a passive investment in the S&P 500, with dividends reinvested, would have grown to about $240 million-outperforming the Pollock while offering greater liquidity and lower costs."

"If anything is "investment grade"-the trade's term for a piece of stellar quality and provenance, with art historical significance-the 11-foot-wide canvas that Pollock painted on a barn floor in East Hampton is it. Six bidders chased after the work, which was the earliest and largest drip painting to come to auction since 1961, according to Christie's."

"It's sobering to realize that even a once-in-a-generation Pollock appears to have underperformed a basic index fund. Many other works that sold over the past two weeks in New York tell a similar story. The best offered returns in line with conservative long-term assets, rather than red-hot tech stocks. The middle tier got crushed. The narrative of art as an investment no longer matches market reality."

""Buying art as an investment? It's quite risky," David Nash, a veteran art dealer, said. "My advice to collectors has always been: Buy something because you love it, not because of its investment possibility." Nash has seen many successes and many failures during his six decades in the art market. His view? "It's ultimately a gamble.""

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