Between now and 2030, an estimated $15.4 trillion worth of assets will have been passed down the generations by the world’s richest people. Does it bode well for the art world? And how would it impact an already volatile art market? Scott Reyburn examines.
The numbers vary wildly, but all are dizzying: $15 trillion. $30 trillion. $59 trillion. $68 trillion.
These are the figures being bandied about as economists and financial experts try to get their heads around a global phenomenon known as the “Great Wealth Transfer.” Between now and 2030, an estimated $15.4 trillion of assets will have been passed down the generations by the world’s richest people, according to a report published this year by the specialist analytics company Wealth-X.
“With the global wealthy population at an all-time high, the next 10 years will see the biggest-ever wealth transfer in modern history,” said Maeen Shaban, the director of research and data analytics at Wealth-X, whose report concentrates on people with net assets of $5 million or more—the richest 0.1 percent of global society.
The Wealth-X report estimates that the United States’ wealthiest will pass on $8.8 trillion of assets over the next decade. Most of those are baby boomers currently in their mid-60s and older who over the years have benefited from financial deregulation, globalisation, and rising real estate and stock prices. They will hand down assets to members of Generation X, in their 40s and 50s, and, to a lesser extent, to millennials now in their mid-20s and 30s, the report says.
Most of those assets will be financial: stocks, bonds and trust funds. “Illiquid assets” like real estate and investments of passion—including art—make up more than $1.9 trillion of the total, according to Wealth-X.
Doug Woodham, a managing partner of Art Fiduciary Advisors, an advisory company in New York, said there were many collectors born after 1940 who, “through a combination of luck and good judgment,” have bought art from the 1960s, ’70s and ’80s that has significantly gone up in value. “There are lots of collections that will come to market over the next 20 years,” he said.
But will today’s wealthy 30-somethings and 40-somethings develop a passion for buying art that will maintain its price? Digitally minded millennials’ widely observed preference for experiences rather than possessions might suggest otherwise.
According to the Wealth-X report, wealthy people 70 and older now list art as their sixth most popular interest, passion or hobby. Art drops off the list among those under 70, with sports, technology and philanthropy the most popular interests among the under-50s.
“At the moment, people aged about 60 are at the peak of the earning capacity,” said Marc Porter, chairman of Christie’s America, “and they are buying postwar art that was collected by their parents’ generation. The cycle will change.”
Drew Watson, an art services specialist at Bank of America Private Bank, said there was a cultural difference between preboomer collectors, motivated by “connoisseurship and aesthetic appreciation,” and subsequent generations, who had “more of an awareness of the financial component of art.”
As a result, boomer collectors have been less inclined to donate art to museums, either public or private, and lose a leverageable asset.
Out of public spiritedness —and a desire to reduce tax bills—collectors from an older generation have tended to keep their masterpieces away from the auctioneer’s gavel. In the United States, works donated to nonprofit institutions during a collector’s lifetime do not incur capital gains tax.
Woodham pointed out that while masterpieces by the great names of Western art will continue to command exceptional sums, “second-tier works by second-tier artists”—which represent the bulk of what most collectors own—are “unlikely to be great stores of value over time.”
The price of art is particularly vulnerable to changes in collecting taste, Woodham said.
Take Impressionism, the rocket fuel of the late-1980s art boom. Although a superb Monet masterpiece sold for a record $110.7 million at Sotheby’s in May, two good, market-fresh landscape paintings by his fellow Impressionist Alfred Sisley were knocked down at Sotheby’s to single bids of $1 million in November. Similar works by Sisley routinely sold for about $1.5 million in the 1990s, according to Artnet, the art market information company.
Changes in taste could also be a ticking bomb for the Andy Warhol market. In 2017, Jean-Michel Basquiat dethroned Warhol as the biggest-selling US artist at auction, and remained so in 2018, according to Artprice, a French analytics company.
A Warhol Marilyn silkscreen painting valued at $50 million is expected to be included in next year’s eagerly awaited auction of the $700 million collection of New York divorcees Harry and Linda Macklowe. That painting may well fetch a spectacular price. But in the long term, will there be a global depth of demand to support the prices of the many canvases accumulated by boomer collectors?
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“You have to be an artist and an activist who fits into a social justice or environmental narrative,” Woodham said, characterizing the kind of art that today’s younger collectors want to buy.
Where that will leave the market for dead white male avant-garde artists is anyone’s guess.
Next April, Christie’s will serve as a reminder of the changing vagaries of money and taste when it auctions the private collection of Jayne Wrightsman, an oil heiress, museum patron and society hostess who died in April at age 99.
Estimated to raise $8 million, and sold to benefit philanthropy, this material, with its emphasis on 18th-century French decorative arts, represents the apogee of another era of taste from the Upper East Side of Manhattan. A marble-topped upright “table de café” made in the 1780s by Martin Carlin for the aunts of Louis XVI is estimated to sell for $80,000.
Gerald Reitlinger, in his 1963 book, The Economics of Taste, wrote that back in 1937, when 18th-century French furniture was all the rage with the ultrawealthy, a desk by Carlin sold for 8,000 pounds, or about $700,000 in today’s money. That same year, a cubist still life by Picasso failed to sell at auction for £105, according to Reitlinger.
Wealth-X, in its report, said that “while the fundamentals of wealth transfer perpetuate, the external environment will continue to evolve.”
So, too, will how the wealthy spend their money.
© 2019 The New York Times