Art & Finance Newsletter #6
In the closing remarks of the previous newsletter I mentioned that I would highlight art fairs in this weeks edition. But much happened in the art world in the previous two weeks that I want to touch on so I'll just do a quick paragraph here:
Art fairs are a shopping experience that has been elevated to fine art. Commercial galleries gather in a single location and exhibit pieces of art for sale in cubicle like spaces. Not only do art fairs provide a platform for galleries to reach a broader audience and buyers, the art fairs themselves function as a barometer for the art market.
If you want to learn more on how art fairs can be used as an excellent client engagement tool...be in touch. I've got a sexy presentation outlining art fairs ready for you!
On to the art market...
Changes to US based art sales & purchases
The Supreme Court of the United States ruled in the long-awaited South Dakota v. Wayfair et al. decision, which determined whether the South Dakota law, requiring certain out-of-state retailers to collect sales tax, was constitutional.
In light of this decision, art businesses must re-evaluate whether they have a sales tax collection responsibility to any state in which they deliver art, and art collectors should also follow any subsequent changes in state legislation that may affect individual sellers.
This ruling has paved the way for other states to enact similar legislation based on South Dakota's statute. As 41 states, 2 territories, and the District of Columbia asked SCOTUS to reject the prior physical presence rule, in support of South Dakota, it is likely that other states will enact legislation modelled on South Dakota's law to increase their state sales tax revenues.
SCOTUS - South Dakota v. Wayfair syllabus
Art market overtakes the wine market
The art market had an exceptionally strong year, beating out other luxury assets to claim first place on Knight Frank’s Luxury Investment Index.
Led by a few astronomical sales of impressionist and post-war paintings, including Christie’s $450.3-million sale of Leonardo da Vinci’s Salvator Mundi in New York last November, the art market grew 21% from April to March, overtaking wine (9%) as the top-performing asset.
In addition, there was a significant surge in interest in less well-known contemporary artists, who have also been seeing sales with multi-million dollar results.
In contrast, during the 12-month period from April 2016 to March 2017, art gained 7% annually and ranked the second out of 11 asset classes Knight Frank tracks, while wine topped the list with a 25% growth.
Warhol sold in blockchain auction
Art blockchain platform Maecenas announced that Andy Warhol’s 14 Small Electric Chairs (1980) will be the first on its platform to be tokenised.
Cryptocurrency and art enthusiasts will be able to own fractional shares in the artwork by bidding at an auction. The auction—which will be the world’s first cryptocurrency art sale—will be held in collaboration with Dadiani Syndicate, the first fine art gallery in the UK to accept cryptocurrency payments for collectables. During the auction, Dadiani and Maecenas will make up to 49% of the painting, which will be listed on Maecenas’ blockchain platform, available for ownership.
Buyers will be able to purchase digital certificates on the blockchain representing fractional ownership in the work, which is currently valued at £4.2m ($5.6m).
Arts & Collections Intl. - Warhol sold in blockchain auction
Do private banks need engagement with the art market?
This question was posed to me in a recent meeting with the heads of a private bank. The question was obviously answered the moment it was asked - Yes they do!
In recent years every wealth report or white paper produced has positive numbers supporting the trend of clients seeking assistance in their non-bankable assets. So why are few private bankers or wealth managers offering substantive assistance for their clients fine art needs?
I've got some ideas of the answer, but I would love to hear from you! What are the opinions about the art market you hear amongst your colleagues?
Until next time,
Blake