Art Markets’ Susceptibility to Rating Repair

The professionalization of an asset class can only be achieved with reliable rating offers.

More artworks are offered and traded digitally than ever before. With 24/7 worldwide bidding, “Artnet Auctions” is a leading online-only marketplace for buying and selling fine art. New bidders, buyers, and consignors across categories, geographies, and demographics entrust artnet Auctions with their needs.

Efficiency, digitally native operation, quick turnaround, and continuous sales throughout the year are the strengths of artnet in the industry. The auction platform allows for immediate transactions, with a seamless flow between sellers, specialists, and collectors. Complementing the online auctions, artnet can be considered as a leading resource for researching art online.

Founded in 1989, Artnet’s product suite has revolutionized the way people discover and collect art today. The Price Database contains more than 14 million auction results from 1,900 auction houses dating back to 1985, providing an unparalleled level of transparency to the art market. The Gallery Network platform connects leading galleries with collectors from around the world, offering a comprehensive overview of artworks for sale. Artnet News covers the events, trends, and people shaping the global art market with up -to-the-minute analysis and expert commentary. Artnet AG is listed in the Prime Standard of the Frankfurt Stock Exchange, the segment with the highest transparency standards.

The changes in the art market are picking up speed at a tremendous pace. Changes no longer take place over decades, but rather over years and months. Artnet Auctions provide an example for the market dynamics. Artnet Auctions fee-based revenue increased significantly by 23% to 3.0 million USD in the first six months of 2021, as compared to 2020 (2,423k USD). Following continued record success in the first half of the year, Artnet Auctions has announced several key initiatives and sales in advance of the Fall 2021 season. Artnet starts to offer Non Fungible Tokens (NFT) as part of artnet Auctions fall season sales. “Bridging the gap between the traditional art business and the crypto world, we will be offering a diverse selection of NFT artists this fall,” said Jacob Pabst, Artnet CEO.

How do the transactions work?

True to the business’ belief in ensuring opportunity for transaction and liquidity in the art market at all times, Artnet Auctions is offering a sale of Robert Indiana’s iconic and rare to market LOVE this August. With an estimate of 250, 000 USD to 350,000 USD the all red sculpture from a series of eight will be live for bidding through August 25th – a time that has historically been quiet in the market for works of this caliber. The LOVE sale closes alongside 21st Century Prints, a sale featuring new and old works by widely renowned artists and printer-publishers, such as Banksy, Damien Hirst, and Nicolas Party.

At Artnet Auctions, a second iteration of the “Africa Present” sale, presented in partnership with Africa First founder Serge Tiroche, will go live on August 31, 2021. “This second iteration will additionally be presented in partnership with Latitudes Online, a leading online destination for the African art market. The sale will featu re works by Aboudia, Ablade Glover, Patrick Bongoy, Virginia Chihota and more.”

The experts at Artnet forsee that September will be a strong month for Artnet Auctions, which will feature a number of important sales, including Important Photographs , the category’s top sale of the season. “The sale will feature a work by German artist Andreas Gursky carrying an estimate of 300,000 USD to 400,000 USD. Additionally, works by Irving Penn, Cindy Sherman, and Vik Muniz will be offered within this spectacular sale.”

The role of art ratings

The core idea of every rating is to express a probability of the extent to which the expectations of a buyer or investor are met. While a system of credit ratings and rating agencies has developed for the bond markets over the last century, which, with state authorization and supervision, provides an elementary basis for private, but especially professional investors to make decisions about investments, there are approaches to art rating so far only in its infancy.

There is just as much controversy about the criteria and standards to be used in an art rating as about the suitability of the methodology and models. With the change in the forms of trade, the conditions for pricing also change, because every art market is nothing else than the economic place where supply and demand for art meet. Capturing, ascertaining, recognizing, evaluating and assessing the factors that determine an art rating is an art in itself.

The know-how and the skills to assess the value of art not only for today, but also with regard to its development for the future, are in the hands of comparatively few experts. The knowledge can be found in auction houses, gallery owners, leading collectors and, of course, the artists themselves, to name a few.

However, in order to develop an asset class more broadly and, in particular, to make it accessible to institutional investors who are required to report to their investors and stakeholders, independent ratings are required that express a neutral assessment. Today value judgments can still be found in numerous media and organizations of the art trade as well as museums.

The confusion of all these opinions leads to the formation of opinions by buyers as well as sellers of art. Accordingly, opinions about high, medium or low probabilities of a positive development in the value of art are expressed in a correspondingly little evidence-based manner. In the financial markets, credit ratings are the language used to express the probabilities of default. Stock ratings are used to express buy, sell or hold recommendations. Institutional investors can use this sophisticated system to make rational investment decisions.

The more unprofessional ratings are given, the more likely it is that expectations of art investors will be disappointed. Likewise, art collectors will regret their sale when they quickly realize that they could have realized a much higher price in a short period of time. Avoiding all of these disappointing decisions depends on the availability of efficient art rating systems.

The greatest boom in the art markets is yet to come. If rating systems become available that make the performance of art fund managers comparable and controllable, the art market would make even more financial resources available in the billions.