Financialisation of the Art World Bad News for Many Artists

April 23, 2015 – In The News
Private Art Investor

Lisa A. Karczewski was featured in the Private Art Investor article,Financialisation of the Art World Bad News for Many Artists.” Full text can be found in the April 23, 2015, issue, but a synopsis is noted below.

Despite the fact that art is becoming progressively more financialised, Lisa Karczewski says that some types of art are suffering from the opposite.

Responding to this, she said that, “with the globalization of the art market and significant increase in wealth, particularly in the new growth markets of Asia, the Middle East and Latin America, an increasing number of ultra-high-net-worth individuals are buying and investing in art and collectibles. The 2014 Art & Finance Report by Deloitte and ArtTactic revealed that 76 percent of surveyed art collectors acquired art and collectibles as an investment strategy in 2013, up nearly a quarter from 2012.

“This presents a tremendous opportunity for art financiers and wealth managers to provide a diverse range of art and wealth management services and thrive on the backs of some of the world’s most affluent art collectors,” she continued.

“In recent years, art collectors are increasingly using their art as collateral and then reinvesting the funds in either additional art or other assets,” Lisa said. “Art finance is regarded as a wise way to use one’s capital such that by leveraging one’s art, the work can stay on the wall, while creating greater liquidity among collectors.”

The problem with this is that as prices go up for more renowned works, lesser-known ones are steadily losing value, according to Lisa. “Buyers and values tend to significantly drop for less established names,” she said. “Accordingly, the more the art market becomes financialised, the greater the risk that demand from art collectors will become narrowly focused on a few exclusive and expensive names in the art market.

“Of course, artists will always fall in and out of fashion as driven by collectors’ specific tastes at the time and the current trends in the art auction market,” she added. Regardless, she does believe that financialisation will continue based on recent market trends.

“However, only time will tell whether buyers will continue their focus on a narrow range of established artist names,” she concluded.