What the May Auctions Revealed About Art as an Asset Class
By Katya Kazakina
An iconic drip painting by Jackson Pollock from the collection of S.I. Newhouse fetched $181 million at Christie’s last week. The price for Number 7A (1948) was heralded around the world as exceptional.
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But was it an exceptional investment?
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Newhouse bought Number 7A for $32 million in a private transaction in 2000, according to Alex Rotter, Christie’s global president. Over 26 years, the annualized return for the Pollock comes to about 6.6 percent, not including carrying costs like insurance. Over the same period, a passive investment in the S&P 500, with dividends reinvested, would have grown to about $240 million—outperforming the Pollock while offering greater liquidity and lower costs.
Auctioneer Adrien Meyer sells Jackson Pollock’s Number 7A (1948), the top lot of the S.I. Newhouse sale, for $181.2 million. Courtesy of Christie’s.
And Number 7A—the top lot of the $2.5 billion May auction season in New York—was the best of the best.
If anything is “investment grade”—the trade’s term for a piece of stellar quality and provenance, with art historical significance—the 11-foot-wide canvas that Pollock painted on a barn floor in East Hampton is it. Six bidders chased after the work, which was the earliest and largest drip painting to come to auction since 1961, according to Christie’s.
It’s sobering to realize that even a once-in-a-generation Pollock appears to have underperformed a basic index fund. Many other works that sold over the past two weeks in New York tell a similar story. The best offered returns in line with conservative long-term assets, rather than red-hot tech stocks. The middle tier got crushed. The narrative of art as an investment no longer matches market reality.
“Buying art as an investment? It’s quite risky,” David Nash, a veteran art dealer, said. “My advice to collectors has always been: Buy something because you love it, not because of its investment possibility.”
Nash has seen many successes and many failures during his six decades in the art market. His view? “It’s ultimately a gamble.”
Publisher S.I. Newhouse Jr. and editor Anna Wintour attending “Diana Vreeland Sculpture Exhibit” on November 6, 1989 at the Metropolitan Museum of Art in New York. Photo by Ron Galella, Ltd./Ron Galella Collection via Getty Images
Beneath the headline-grabbing prices were a series of painful reversals. Here are few. (All prices include fees, unless otherwise noted.)
– A small mixed-media work on paper from 1948 by Pollock, formerly in dealer Bob Mnuchin’s collection, shares some of the same qualities that collectors prize in Number 7A: an early date and strong provenance. Yet it sold for just $9.2 million at Phillips, about 40 percent below the $15.3 million it reached two years earlier. (The buyer never paid, triggering a lawsuit and leaving Phillips to resell the work under distressed circumstances.)
– Andy Warhol’s Sixteen Jackies (1964) made $16.2 million at Phillips, down nearly 40 percent from the $25.9 million it brought at Christie’s just three years ago.
– Billionaire Lorenzo Fertitta lost almost 30 percent on another Warhol, the iconic silver Double Elvis (1964), which sold for $27 million at Christie’s after costing him $37 million in 2018.
Andy Warhol, Sixteen Jackies (1964). Courtesy of Phillips.
Not all the declines were dramatic.
– Claude Monet’s La Route de Vétheuil, effet de neige (1879) sold for $9.29 million at Phillips, down from $11.4 million at Christie’s in 2017.
– In the same sale, Gerhard Richter’s abstract painting Besen (1984) brought $8.1 million, below the $10.2 million it achieved at Christie’s Hong Kong in 2022.
– At Sotheby’s, Egon Schiele’s Portrait of a Woman with Blue and Green Scarf (1914) sold for $1.92 million, slightly below the $2.05 million paid for it in 2019.
Jackson Pollock, Untitled (circa 1948). Image courtesy of Phillips.
Then there were the works that didn’t sell, though such flops were relatively rare because auction houses pre-sold an average of 83 percent of evening-sale lots by value through irrevocable bids.
– Sotheby’s failed to sell August Rodin’s Penseur, Taille de la Porte dit “Moyen Modèle, conceived in 1880 and cast posthumously. The bronze had been purchased for €10.7 million in 2022 and carried an estimate of $8 million to $12 million last week.
– There were no takers for a charming Joseph Cornell box from his “Medici” series at Christie’s, which estimated it at $3 million to $5 million. The owner had paid $4.2 million for the work at Sotheby’s in 2017.
– A few minutes after the frenzied bidding for Number 7A, a Pollock work on paper from 1944 failed to attract a single bid. The consignor had purchased it for $4.2 million in 2019.
Same artist. Same sale. Same auction house. What gives?
Was the Pollock drawing too modest for trophy hunters? Was it still too expensive for the trade, even though its $2.5 million low estimate represented a 40-percent reduction from its 2019 price?
Oliver Barker, Sotheby’s Chairman, Europe, fields bids during the “Robert Mnuchin: Collector at Heart” evening auction in New York. Courtesy of Sotheby’s
According to Nash, there’s no relation between the two works in terms of value or market dynamics.
Here’s the way he sees it. Demand for pictures like Number 7A is so intense because the ranks of the mega-rich are expanding, while the chances of acquiring a work of this caliber in the foreseeable future remain slim to nil. On the other hand, a Pollock drawing isn’t on every billionaire’s bucket list.
“It’s symbolic of the state of the market,” Nash said. “A perfectly nice Pollock drawing that would have been very much in demand a few years ago, the number of people competing for it slipped. Whereas the number of the people competing for Number 7A is higher than it was a few years ago.”
The idea that art is a dependable investment vehicle—not just a store of value—has become deeply embedded in the market over the past five decades. It goes at least as far back as 1974, when the British Rail Pension Fund began allocating about three percent of its assets to art as an inflation hedge. In the ensuing years, the fund spent £40 million acquiring thousands of works, advised primarily by Sotheby’s. Its collection was liquidated in the 1980s and 1990s. The returns—widely cited at roughly 11 percent annually, a figure debated by some analysts—helped lay the foundation for a belief system around art as a dependable investment.
Things have accelerated dramatically since then. Investment funds multiplied. Banks expanded art-secured lending and hired specialized advisors. Deloitte and AXA Art began publishing annual reports framing art as an alternative asset class. Speculators flipped emerging artists like IPO stocks.
But no frenzy lasts forever. Emerging-art bubbles have burst time and again. The British Rail Pension Fund’s results remain unmatched, though Mnuchin reportedly ran a successful fund whose results have never been publicly disclosed.
But even strong results pale in comparison with stocks and bonds when viewed long-term.
Vincent van Gogh’s La Moisson en Provence (1888) sold for $29.4 million on an estimate of $25 million to $35 million. Courtesy Sotheby’s
Take Vincent van Gogh’s La Moisson en Provence (1888), which went for $29.4 million at Sotheby’s modern art evening auction on May 19. The owners, Greg and Stacey Renker, had purchased the exquisite work on paper for $10.3 million in 2003. The 185 percent increase in nominal value translates to a roughly 4.7 percent annualized gain over 22 years. (Adjusted for inflation, the real annualized return falls to approximately 2.1 percent.)
Invested in a 10-year Treasury bond at the prevailing 2003 rate of 4.05 percent, the same $10.3 million would have grown to about $24.9 million today. While the Van Gogh beat that by about $4.5 million in nominal terms, it may not have come out ahead once you factor in the carrying costs.
But investment was never a major consideration for the Renkers, who lived with their art instead of putting it in storage, according to their advisor Katherine K. Reid.
“They are just passionate collectors,” she said. “They didn’t buy it thinking, ‘This is a stable investment.’ They bought it because they loved the work.”
Still, the couple was pleased with the auction result for the Van Gogh, as well as for Willem de Kooning‘s $26 million Untitled III (1975) this month. They also did well on earlier sales of Eduard Manet‘s $10.1 million Vase de fleurs, roses et lilas (1882) and a Joan Mitchell‘s $22.6 million Noon, she said.
Édouard Manet, Vase de fleurs, roses et lilas (1882). Photo courtesy of Sotheby’s.
“They bought the best that they could buy,” Reid said. “They certainly weren’t throwing money out the window, and most of the artworks that they’ve acquired over the last 20 years have generated a return of varying percentages.”
Such calculations, of course, don’t include the incalculable values of owning a work of art, let alone a Van Gogh or a Pollock: aesthetic pleasure, social prestige, potential philanthropic impact, and for some sophisticated collectors, substantial tax advantages.
There can also be public benefits. The Renkers, who sold the work anonymously, lent the piece over the years to the Palm Springs Art Museum in California and the Detroit Institute of Art, according to Sotheby’s. Leon Black’s two Raphael drawings are currently on view at the Met’s blockbuster exhibition (he paid almost $50 million for each of them, setting an auction record for the Old Master). Ken Griffin, the biggest whale in recent years, has loaned his trophy art to the Norton Museum of Art in West Palm Beach, Florida. There are many other examples.
Nash, who helped put together the storied collection of Microsoft billionaire Paul Allen and found pieces for others billionaires, including Newhouse, believes that art buyers at the highest level are rarely motivated by the resale value of their art.
“Si bought Number 7A because he wanted to own it,” he said “He was a passionate collector with a real feeling for Abstract Expressionism. I think investment was the last thing on his mind.”
October, 16 1958 in London: Bidders and auctioneers at a Sotheby’s auction of New York millionaire Jakob Goldschmidt’s collection of Impressionist paintings. Cézanne’s Boy in a Red Waistcoat (1888–90) is being shown to the bidders. Photo by Keystone/Getty Images
It was 1958, and Sotheby’s had won the chance to sell seven Impressionist paintings, by Monet, Cézanne, and Renoir, from the collection of German-American banker Jakob Goldschmidt. The black-tie auction in London would go on to acquire legendary status in the annals of the art market.
Sotheby’s first evening sale ever, it generated about £781,000, around $2.2 million at the time, in just 21 minutes. Auction records were established, then broken—twice in the same evening. A large crowd of onlookers gathered outside, and police had to maintain order.
“It was a turning point in the art market,” Nash said. Up until then, paintings were seen as a store of value, but “the idea of art as an investment didn’t exist. You bought a painting because you liked it.”
One of the buyers at that sale was the Greek shipping tycoon and art collector George Embiricos, who died in 2011. He paid £90,000 (about $252,000 then) for Cézanne’s still life Les Grosses Pommes (1890–94), an extraordinarily high price, according to Nash.
In 1993, Embiricos decided to sell the picture to build a boat, and he gave it to Nash, who was the worldwide head of Sotheby’s Impressionist and modern art. The two men stood next to each other in the salesroom, watching the painting sell for $28.6 million.
Nash recalled this week: “The moment it was hammered down, he said, ’17 percent.’ I said, ‘What 17 percent?’ He said, ‘That’s the growth rate per annum.’ He certainly didn’t buy with that in mind. But he thought of it when he sold it.”
This article was originally published by Artnet News.