SINGAPORE (Nikkei Markets) -- As alternative investments go, the market for fine arts has long been characterized as being both opaque and illiquid. But, according to participants and observers, the business is gaining depth, with the emergence of new collectors among wealthy millennials and women.
The trend, alongside changing tastes and the growth in online platforms, could reduce the influence of galleries as well as lower transaction costs and make prices more transparent for both artist and collector.
An annual report on the global art market by Swiss private bank UBS and Art Basel, the world's largest art fair organizer, showed that among high-net-worth individuals, millennials, or those below the age of 38, spent six times more on art than those over 55 in the past two years.
In terms of gender, female collectors were fewer in number. But they tended to spend more and had larger collections on average compared to men. Overall, a third of women had more than 100 works in their collection compared with 21% of men, the report added.
Millennials were also more optimistic about art as an investment and were more likely to sell works from their collection compared with older collectors.
Although stories abound of art pieces selling for fabulous amounts at auctions, such gains are limited to a sliver of the high-end market, say advisors. Unlike with stocks or bonds, valuing a work and finding a buyer can be a difficult, long drawn out process.
Singapore-based Jolyn Pek, an art collector in her 40s, said valuation is especially hard in the case of contemporary artists as they may stagnate creatively or move to a genre different from the one they are known for. Pek warned that art is not a pure investment and said buyers must have an emotional connection with a work.
Despite the risks, more new collectors prefer to support emerging artists rather than chase established names, said gallery owner Meg Maggio, whose Pekin Fine Arts operates in Beijing and Hong Kong.
"Even those who may be set to inherit large collections from their parents are striving to make their own mark and follow their own collecting paths. Thematically, we see a growth in interest in artworks that address the pressing socio-political issues of our day," added Adrian Zuercher, head of asset allocation for the Asia Pacific region at UBS.
According to UBS's latest report, global sales of art and antiques reached an estimated $64.1 billion last year, down 5% from 2018. The number of transactions, however, increased by 2% to a decade-high of 40.5 million. As in previous years, the U.S., U.K. and China accounted for a majority of global sales.
Sally Clarke, managing partner at Asian Art Advisory in Singapore, said that the art market was probably a lot larger since many buyers in central and Southeast Asia buy works directly from artists, bypassing the galleries and auction houses that are the focus of the UBS report.
Still, global sales are likely to fall further this year as many major art shows have been cancelled due to the COVID-19 pandemic. But in the long-term, the growing number of participants as well as the rise of online channels where buyers and sellers can interact is set to boost the market.
Art Basel, which was forced to cancel its March fair in Hong Kong, replaced it with a virtual edition that ended Wednesday. More than 90% of exhibitors joined the move online, the South China Morning Post reported.
Mike Bruhn, an art consultant based in Shanghai, said that while galleries continue to play an important role in identifying and marketing new artists, millennials were less willing to pay the commissions charged by galleries since a lot of information is available on the web and they can buy and sell online. Typically, galleries charge commissions that range anywhere between 20% and 50%.
Nicolas Laurent, 31, who began collecting art with his wife about two years and a half ago and focuses on emerging female artists from Southeast Asia, said he identifies and keeps track of promising artists through web searches and by taking note of exhibitions in which they have participated.
One popular channel is Instagram, which allows artists and galleries to reach out to potential collectors, said Singapore-based Laurent, an associate director at Cult Wines, an investment company specializing in fine wines.
Laurent showcases his collection on Instagram, and said newcomers can learn more about art investments by joining organizations such as the Young Collectors Club set up by Christie's Education, an academic institution owned by the famous auction house, and MTArt Agency, an agency for up and coming artists.
-- Kevin Lim