Former Microsoft CEO and philanthropist Bill Gates has used his wealth to create a unique art collection over the decades. In 1998, he purchased Winslow Homer's "Lost on the Grand Banks" masterpiece for $36 million, a then record buy.
Gates' most intriguing addition to his artefact collection could be Leonardo da Vinci's handwritten scientific journal, "The Codex Leicester," with entries estimated between 1504 and 1508. Gates paid a jaw-dropping $30.9 million for the artefact.
Another one of his big buys was in 1999 at the Sotheby's auction. Gates purchased the "Polo Crowd" painting by American artist George Bellows for an estimated $27.5 million.
He bought several other masterpieces like the "Room of Flower" by Childe Hassam for $20 million and the "The Nursery" by William Merritt Chase for $10 million. Many of his paintings have found a place in the Gates' library.
Investing in arts and artefacts has been a long-standing interest for the ultra-wealthy. There are several reasons why Gates and other billionaires are willing to spend millions on a piece of art.
Firstly, artefacts and paintings are uncorrelated to the stock markets and can offer a hedge against inflation. Adding them to your portfolio for diversification may provide stability during market upheavals. Furthermore, purchasing art has been a well-known practice of preserving wealth. The uniqueness, scarcity, and high demand help preserve its value for a long time. Buying art is also enticing for high-net-worth individuals seeking privacy related to their financial activities, as some markets enable investors to purchase anonymously.
The UBS Billionaires Report found that out of the 74 billionaires worldwide surveyed in the late summer of 2023, 80% planned to retain their existing exposure to art over the next 12 months. Meanwhile, around 11% planned to increase their exposure in the asset class in the same period.
The global art market was one of the first sectors to rebound strongly after the pandemic hit in 2020 when transaction volumes fell sharply. Sales increased by 31% in 2021 from the year prior due to robust demand from billionaires as their wealth increased tremendously relative to prepandemic levels.
In collaboration with UBS, Art Basel's latest report revealed that online art sales in 2023 increased 7% year-over-year to reach approximately $11.8 billion despite a market drag, making up 18% of the total market turnover. Meanwhile, post-war and contemporary art remained the largest fine art auction market segment last year.
Around 36% of art dealers forecast sales growth in 2024, with 54% of the largest dealers staying optimistic for a better year. The US, China, and the UK remained the biggest auction markets in 2023, accounting for a cumulative share of 74% of public auction sales by value.
Despite an uptick in online art sales globally, many potential investors remain sceptical of buying art online or are unaware of the online resources available for collectors. Furthermore, the high-cost entry barrier has long kept the ordinary person from investing in this asset class.
Several online art stores like Masterworks are succeeding in democratising the marketplace by purchasing art for you and securitising it with the US Securities and Exchange Commission so that you can buy shares representing iconic masterpieces at a significantly lower price. They use proprietary data and acquisition teams to identify artists like Banksy and George Condo and purchase their art after a rigorous screening process before listing on their online platform.
Once listed, they hold the piece for years for value appreciation, allowing investors to purchase artwork shares in the meantime. Shareholders realise profits by selling their stake or during a liquidity event. Remember that tangible assets are generally illiquid, so selling shares at a fair price may take time. As of April 1, Masterclass had assets under management worth nearly a billion dollars.
Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.
