Art Market: How a banana taped to a wall is worth $6mn
On November 20th of 2024, Maurizio Cattelan’s “Comedian” was sold to cryptocurrency entrepreneur Justin Sun at a Sotheby’s New York auction for $5.2mn plus fees, amounting to $6.24mn total. Cattelan’s piece of contemporary art is unlike Yayoi Kusama’s dotted sculptures or Andy Warhol’s Campbell’s tomato soup, but simply a ripe banana duct taped to a blank wall.?
To clarify, Sun didn’t just buy a duct taped 25 cent banana, he also purchased the rights to?reproduce the artwork, along with a certificate of authenticity and a manual explaining how a recreation should be installed - he has even eaten the banana as part of the artistic experience!?
The colossal amount that was just paid for this piece of contemporary art forces us attest that the banana is obviously much more than a mere piece of fruit defying gravity through means of scoth tape. The meaning behind pieces of art seems to have been growing in value through history. But when did it start??
At its core, the art market is simply a physical or figurative venue in which art is bought and sold. The work of art might be drawn from a very wide range of collectible objects and the market has grown into a multi-billion-dollar global industry – with an annual turnover of about $60 billion. In recent years, art auctions remain one of its focal points.?
The art auction model consists of a succession of increasing bids or offers by potential purchasers until the highest bid is accepted by the auctioneer. The phenomenon ‘auction fever’ was fabricated by the tense environment and heated competition between bidders, leading to soaring prices – like the $6mn banana in question.
The first evidence of art auctions date back to Roman times, where slaves and valuable stolen war goods were traded. With the origination of the mercantile-class and appearance of diposable income in the 17th century, collector-based auctions started emerging. The 19th century saw the rise of influential art movements, such as Romanticism, Realism, and Impressionism, which broadened the appeal of art. Art dealers and galleries emerged as intermediaries between artists and buyers, expanding the market's reach and artists began to rely less on aristocratic or church commissions and more on direct sales to private collectors and public exhibitions.?
Today, millions of artistic pieces have been traded because?of the moderate positive real return they generate in the long run. Structured solutions offered by art funds offer investors the possibility of investing in a diversified art portfolio which actively trades in art purely for financial gain, incentivizing the circulation of several billions of US dollars per year. These funds use a wide variety of trading strategies, similar to both private equity and hedge funds, trading on the inefficiencies currently present in the art market, which is typically characterized by low liquidity.[am1]??
For instance, Masterworks is an art investment fund that allows investors to purchase shares in pieces of high-value art that have historically appreciated well over time. The fund offers two types of offerings: primary ones, where investors can buy shares in newly acquired artwork, and a secondary market, where shares can be traded among other investors. According to Masterworks, the artworks on their platform have appreciated at an impressive average annual rate of 14%. Another example is the Yieldstreet Art Equity Fund, which requires a high initial investment with a minimum of $10,000. The target returns for this fund range between 15% and 18% over a five-year holding period.?
However, the art fund market is still in a very premature stage. There are few alternatives, and these are only available to investors willing to invest at a substantial level. In time, these funds may become more accessible to the mainstream investor through pooling joint interests, i.e., parties can combine resources, rights, or interests?to pursue shared objectives, in this case, the very exclusive art market. For now, entry levels remain very high.?
All in all, the trendiness of seeking to buy art as an asset has definitely escalated in recent decades.? Auction nights have turned into star-studded events that are not to be missed. I am happy to live in a generation where art is something to be chewed on and not an untouchable canvas that, although beautiful to look at, simply doesn’t have the same nutritious benefits as a banana, and can only hope that first bite into the million dollar banana was worth it.
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Margarida Fernandes
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