Banksy Artwork
Partner Content by Red Eight Gallery

Banking On Banksy: Can Contemporary Art Really Offer Capital Protection?

While it’s hard to generalise on what returns to expect with contemporary art, at Red Eight Gallery we typically realise annual returns of 10-15% or better for our retail investors. Last year we achieved 23% growth in portfolio value for our investor client. To cite specific examples, works by street artist Panik see continued demand with his work achieving a 20% increase in price from 2020.

Liquidity

Liquidity is a major concern for both investors and FAs when it comes to any collectible asset. A key way to increase liquidity is to opt for blue chip artists like Banksy who already have a very mature market. It’s far easier to resell a Banksy print or Damian Hirst original than it is to offload work by lesser-known artists.

Another appealing option to increase the liquidity of your art collection is to use art leveraging. One leading art lender, Bank of America, saw its art loan business grow by 30% in 2020 as wealthy investors sought to free up capital during the COVID-19 pandemic. Collectors can take advantage of current low interest rates to realize attractive loans against blue chip artworks by the likes of Banksy, Picasso or Basquiat. Terms for art-backed loans tend to be a year, with art owners able to borrow up to 50% of the appraised value of their artwork.

Transparency & Trust

Another common concern for investors, and for FAs, is the apparent lack of transparency in the art world which is still largely unregulated. While there is some truth in this, there are easy ways to minimise your risk. Always purchase work from trusted galleries or brokers, and wherever possible stick to authenticated works which come with a signed certificate or statement of authenticity. Banksy makes this especially straightforward thanks to “Pest Control” which is the only organisation permitted to authenticate his work.

A Passion For Art

While investors should always make financial decisions with their head and not with their heart, one added benefit of art investment is that it also looks very good on your wall. For those who have a real passion for art, this can be a powerful additional reason to acquire a few investment-grade pieces for your home or office space. A well-chosen piece of art can completely transform the look and feel of a room - now that’s something you can’t say for share certificates!

Request your free “Art Market Report Q2 2021” for in-depth analysis on the contemporary art market.