A collaborative paper titled “Democratizing Art Markets: Fractional Ownership and the Securitization of Art,” written by Amy Whitaker, an assistant professor in visual arts management at New York University, and Roman Kräussl, a professor of finance at the University of Luxembourg, suggests that artists could be even better off financially than a buyer in the stock market if they keep an investment stake in their own work, reports Sarah P. Hanson of the Art Newspaper.
In their study, Whitaker and Kräussl used sales information from the Leo Castelli Gallery, creating an imaginary portfolio to investigate what would have happened had artists such as Robert Rauschenberg or Jasper Johns kept 10 percent equity in their own artworks sold by the dealer between 1958 and 1963. For instance, had Rauschenberg kept 10 percent of Rebus, 1955, which was originally purchased for $2,800, the return on the artist’s investment would have brought in $575,000, based on 10 percent of its 1988 sale price$5.75 millionat a Sotheby’s auction in New York. Johns’s False Start, 1959, which was initially purchased for $1,000 and sold at a Sotheby’s New York auction (the same year as Rauschenberg’s Rebus) for $15.5 million, would have seen a return of $1.55 million.
Though Whitaker and Kräussl warn that these are best-case scenarios, the authors theorize that artists and perhaps even dealers could gain something if they were to refrain from taking cash for a work’s first sale and instead receive fractional equity with each subsequent sale of the work. The fractional shares could be moved along by blockchain technology and traded separately from the work itself, which would provide a way for artists to connect with a kind of patronage that is market-driven. Investors could then set up and maintain a diversified portfolio of shares, distributing their risk. Whitaker and Kräussl believe that the fractional equity model could help any artist whose work is difficult to value early in their career but generates profits later on. “Our analysis shows that the people most rewarded by a system like this one are those who are the earliest to take a bet on the art,” said Whitaker. “What’s exciting is that this is an idea which arises from within the arts, as opposed to being imposed on the arts by financial actors.”