For centuries, art has been one of the most dynamic (and beautiful) hard assets, but the lack of transparency in the sector has kept many investors away. However, technology has changed the art world for the better, says Jacob Pabst of Artnet.
Gregg Early: I'm here today with Jacob Pabst, CEO of Artnet (Frankfurt: AYD). Jacob, I wanted to ask you: most of our readers are investors in the stock market, and so the art market might be a little bit different for them, but in this age of transition in the stock market, where does art fit into a portfolio as an investment tool?
Jacob Pabst: Well, the art market has grown exponentially in the last ten years, and has become more and more an alternative form of investment. The problem has been in the past that the market was hidden away and there was not enough information available.
This is something that we provide. We provide the tools for potential investors to learn more about art to see what art that they are interested in, and to buy at the right prices. In a way, we provide transparency to the art world and that has helped the market grow also.
Gregg Early: That's very much like the stock market in the sense that the transparent markets are the markets that are generally the most trafficked by investors because of the transparency. It's the opaque markets and the emerging markets that are the most difficult for anybody to invest in. What you are doing is creating a vehicle to add transparency to the art market.
Jacob Pabst: Yes. There was a lot of resistance in the beginning, because some key players in the market felt that they lost power. They failed to understand that transparency in the long-term or in the mid-term helps the market grow overall and attracts new buyers that in the past have not been able to really understand the market well. The market overall has grown, and we have contributed to that
But then also, there is the fact that more and more emerging countries are entering the market. China for example, Russia, India...there is a lot of new money coming that is invested in art, and so the overall market has grown exponentially in the last couple of years.
Gregg Early: So they are seeing the new wealth that is coming up, the growing middle classes and upper classes are looking to add to their portfolios, their assets, their holdings just as much as they would gold or stocks?
Jacob Pabst: Yes, absolutely.
Gregg Early: Where are you seeing an increase? In the amount of auctions that are going on, or is it the amount of paintings that are coming up for sale?
Jacob Pabst: Both. I mean, the amount of auctions and the amount of art being sold, but also the prices, of course.
There are just completely new markets that also participate in the whole thing. Like I said, China for example has one of the strongest growing art markets in world. There weren't any auction houses 20 years ago, but now they have the third-largest auction house in China, for example. There is just a lot of new money coming from these markets that contributes to the overall growth.