An Intro to Artist Benchmarking

 

Art Market Today

An Intro to Artist Benchmarking

Previously, we described the power of Artist Market Value (“AMV”) and then introduced the AAA 100 as the S&P 500 of the art market.  Institutions and high-end collectors will want to know two things: How did I do? and How did I do against the market?  Here, we are focusing on the second question and comparing the performance of our unnamed blue-chip artist’s AMV to that of the AAA 100. Benchmarking has many uses, but it’s best at bringing matters of risk and return into focus.

How does benchmarking work and what it tells us

In this case, the results are surprising, even counterintuitive. You would think that a blue-chip artist’s performance would closely align with that of the AAA 100 Index and not exhibit much volatility.  That is not the case here; instead, we get the performance profile more typical of emerging, less established artists.

The chart highlights the blue-chip artist’s riskiness:

• A pattern of below-market performance, with AMV at a 12% discount to the AAA 100 at the end of 2020.
• Volatility atypical of an established, blue-chip artist.
• Little, if any, correlated movement with the market. 

Next up, using sub-indexes to provide more direct comparisons and add color. In the meantime, if there are any artists, indexes, or topics you want to see, let us know.

So, we designed the AAA 100 to be the S&P 500 of the art market

 

Art Market Today

So, we designed the AAA 100 to be the S&P 500 of the art market

 In Bringing Clarity to the Art Market, we described Artist Market Value (“AMV”) as the cornerstone of a market-based approach to evaluating art.  Building on that, we are now introducing the AAA 100 Index. Why?  Market indexes like the S&P 500 are easily digestible benchmarks. If they are so widely used for stocks and bonds, and even frozen concentrated juices, why not the art market? Plus, with the Auction market really picking up steam, without access to an index, you might as well be flying blind.

How the AAA 100 Index and other indexes work and what they tell us today 

The AAA 100 is built on AMV, a comprehensive measure that factors in Key Performance Metrics that drive performance and value. It can easily be plotted over time, monitored and used to frame expectations.   It is an unweighted index of 100 leading Post War & Contemporary artists’ AMVs spanning different movements, career points and geographies. Weighted indexes are often dominated by a small number of stocks. On the other hand, an unweighted index provides a snapshot of performance across all its components, irrespective of size.  

The AAA 100 is akin to a value stock index and for context, we have included two additional indexes, one on conceptual artists, the other on blue-chip artists.

 

Trending is pretty revealing and provides a good basis for framing expectations (Note: Any 1^st Half 2020 dips are likely Covid – related.). Through the 1^st Half 2021, expect:

• The appetite for art is still heavy and the general upswing in the AMV 100 should continue.
• Beware of Conceptual-based art – it has been cooling and comparatively volatile for some time.
• Blue-chip artists again continue to track the AAA 100, reflecting a general preference for stability.

Stay tuned! We’ll be periodically providing updates on the AAA 100 Index and introducing additional ones over the next few months. If there is a type of index you would like to see or another topic you find interesting, let us know.  

 

Bringing Clarity to the Art Market

 

ART MARKET TODAY

Bringing Clarity to the Art Market

In the past, the business of evaluating art was driven by connoisseurship.  But the art market has been evolving.  Institutions now are major factors in the market, and they need different tools.  They must measure performance, and continuously monitor and update performance on a real-time basis. That is why they need what they use to evaluate any other type of investment: data.

Banks, insurers, and wealth managers are fiduciaries, and just like high-profile art collectors, do not want to lose money on their investments. So, why do other asset classes such as stocks, bonds, loans, real estate, and insurance undergo more scrutiny than art when the auction market provides a wealth of measurables? The problem has always been translating the data into actionable information.

Art Auction Analytics was built to find the story within the data and bring it to life

We do this by providing valuations and performance monitoring via a proprietary measure, Artist Market Value (AMV). AMV is comprised of several metrics (Key Performance Metrics of KPMs) including Demand (actual vs. expected price), Liquidity, Movement, among others. This allows you to look at value and its various components over time and to identify trends likely to affect it in the future. Because AMV is based on actual auction transactions, it is objective, verifiable, and easily accessible. It enables you to make major financial commitments with a high degree of confidence.

Monitoring AMV Shows that Even Blue-Chip Artists Can Go Out of Favor

Any asset will have swings in value, and you can’t afford to be blind to them. You also need to be able to anticipate changes. This chart highlights the movement of a particular blue-chip artist’s AMV over the past five years. 

Conventional wisdom is that blue-chip artists, much like blue-chip stocks, maintain their value over the long term. Thus, they are safe bets. But even blue-chip artists are not immune to fluctuations in value. If an artwork by this artist had been purchased in 2018, its value today would have declined by approximately 22%. When millions are at stake, that can be a devastating loss. But now, with data as your guide, you have got a new way to appreciate art for its beauty—and value.

Do you want to know who this artist is? Are there any topics you’d like us to cover in future posts? At Art Auction Analytics, we have AMV data on thousands of Post-War & Contemporary artists and transactions in the tens of thousands. Before you make your next investment, let’s talk.

Next up: the power of Art Indexes