January 10, 2023
A portion of the art collection of Microsoft co-founder Paul Allen was sold at auction for $1.6 billion in November. When Allen was assembling his collection in the 1990s, prices for fine art were relatively low. He died in 2018, but the estate waited until this year to hold the auction, evidently believing that demand for these works has grown. For example, a Cezanne that Allen purchased in 2001 for $38.5 million sold for $137.8 million.
Seeing that this single work more than tripled in value, one may wonder whether fine art might be as valuable as an investment as it is to own and display. Writing for Axios (https://www.axios.com/2022/11/11/paul-allens-block- buster-art-sale), Felix Salmon notes that because Allen purchased most of his collected art at auction, his purchase prices are known, and a rate of return may be determined. According to Salmon's calculations, the annualized rate of return for the pieces that recently went under the auctioneer's hammer came to 6.2%. The growth rate for the S&P 500 over the same period was 8.9%.
But you can't show off an index fund in your home to your friends and neighbors. The financial benefits of collecting art must remain the secondary objective for the collector.