Not a Pretty Picture: Mixed Results for Recent Art Sales

Results of an auction in April show art returns falling behind the S&P 500; though they had strong returns for the past 12 months

"The Scream," painted in 1893 by Edvard Munch.

The record-breaking $120 million sale of Munch’s painting “The Scream” in early May captured headlines. But Beautiful Asset Advisors’ analysis of the recent New York City art auctions tracked by the firm’s Mei Moses database reveal a more nuanced picture of price trends.

The Mei Moses Indexes track repeat sales of artwork that changes hands in publicly disclosed transactions. Their database now contains over 30,000 repeat sales for approximately 20,000 individual works of ar and the database is growing by about 3,000 paired transactions annually. That information allows BAA to calculate compound annual returns for an artwork’s holding period and compare that result with traditional asset classes’ returns over the same period.

BAA’s analysis of the May impressionist and modern sales at Sotheby’s and Christie’s New York May 2012 auctions revealed some interesting results:

The average compound annual return (CAR) for day and evening sales at the firms was 5%. That result was significantly lower than the 12% CAR at the London sales in February.

Had an investor held the S&P 500 Total Return Index for the same period, the CAR would have been 6.6%. “These results show a significant loss in momentum, and it will be interesting to see if next week’s post-war sales will help to regain this lost ground or continue this slowing trend like that which is plaguing the world economies,” BAA points out.

The day sales produced differing results at the auction houses. BAA was able to pair 48 sold lots at Sotheby’s with prior auction prices. Those lots generated an average CAR of 6.8% and an average holding period of 15 years, which was the highest CAR for the auctions. In contrast, the 76 lots tracked in the two day-sales at Christie's produced an average CAR of 3.3% and an average holding period of 14.7 years. This was an extremely weak result of less than half the average return for that collecting category, BAA noted.

Those results weren’t unexpected after the weak first quarter.

In a May 1 press release BAA reported that the Mei Moses World All-Art Index declined about 8 percent for the first quarter of 2012. Sales result rebounded in April, however, the firm noted: “Strong results in traditional Chinese works of art in Hong Kong and art from India in London helped overcome the weaker results for American painting in New York and 19th century painting in London." 

The resulting average compound annual return for the 101 repeat sale pairs was a solid 12.1% — with an average holding period of 8.3 years.

It is interesting to note, however, that if individuals had invested equal sums in the S&P 500 total return index for the same holding period as each of these 101 art objects, the average CAR of those investment would have been 6.3%, shared BAA.

If your clients do collect fine art, make sure you insure them properly. AdvisorOne blogger Gary Raphael of ACE tells you how in his latest posting.

Reprints Discuss this story
This is where the comments go.