Fabian Bocart’s Tutela Capital has released some research on flipping that strikingly contradict’s the current impression of a market free-for-all. Bocart was one of the researchers used by the New York Times in their recent investigation of the phenomenon. But this chart (which comes from a BusinessWeek post) is a more detailed report of Tutela’s findings. Holding periods for artists under 40 are almost at 1995’s record level. Tutela explains that this might be a function of the disruption of the art market after the credit crisis:
During the crisis period of 2009-2011, there was a short supply of new young artists in the art market. The young artists of the time did not have the time to build their market at auction as the crisis led to fewer sales and thus less exposure. The owners, who are generally loss-adverse, kept the young artists acquired prior to the crisis in their collection/portfolio. As a consequence, the pool of young artists was not renewed during the crisis years because of lack of liquidity and poor market circumstances. Therefore the perceived “art flipping” phenomenon may not be interpreted as such, but be understood more as a compensation effect from the crisis period’s lack of renewal.
The short supply of young artists and the willingness of owners and need to renew art portfolios after abnormally long holding periods may be seen as contributing to this form of recent fast market activity. In fact, the perceived increased liquidity at auction corresponds to rotation of stock held before the crisis in an environment of low supply because of the crisis’ damages to supply’s renewal.
We may expect to observe new young artists within two years at auction, which would in return lead to a decrease in the average holding periods and a return to normal.
Read the study yourself here: TC_youngArtists 2