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Skate’s Art Investment Review

2011 Annual Art Investment Report

In this Issue:

Introduction ...................................................................................................................................................... 2

Table 1 Skate’s Top 30 Art Industry e-Commerce Leaders, Technical Merit ............................................... 5

Table 2 Skate’s Top 5 Art e-Commerce Leaders to Watch ........................................................................... 8

2011 Art Market Overview ............................................................................................................................... 9

Table 3 Skate’s Top 5000 Key Metrics in 2011 versus 2010 ....................................................................... 10

Table 4 Skate’s Top 5000 Peer Group: Key Data Points .............................................................................. 10

Table 5 Skate’s Achievement of the Year Awards ....................................................................................... 11

Art Market Liquidity Amid a Chinese Bubble? ................................................................................................ 11

Table 6 Ten Most Active Artists by Number of Artworks Traded Within Top 5000 Price Range................ 13

Table 7 Biggest Changes in the Artists’ Market Capitalization of Skate’s Top 5000 in 2011 ...................... 13

Table 8 Ten Most Valuable Artists in Skate’s Top 5000 (as of December 30, 2011) .................................. 14

Table 9 Top Five Auction Prices Paid in 2011 .............................................................................................. 14

Investment Potential of Art in Skate’s Top 5000: ERR Results of 2011 .......................................................... 15

Table 10 Repeat Sales Data: 2011 vs. 2010 ................................................................................................... 15

Table 11 Ten Most Liquid Artists (Greatest Number of Repeat Sales by Years) ........................................... 16

Table 12 Five Best Exits from Art Investments in 2011 ................................................................................. 16

Table 13 Five Worst Investments in Art Realized in 2011 ............................................................................. 18

Table 14 All Time ERR Records (Based on Repeat Sales within Skate’s Top 5000) ....................................... 18

Table 15 Female Artists in Skate’s Top 5000 ................................................................................................. 19

Leaving Skate’s: Value Reductions and Exits .................................................................................................. 19

Table 16 Revolving Door: Artists Represented in Skate’s Top 5000 of Artworks by Auction Prices ............. 20

Table 17 Top 10 Losers: Artists with the Greatest Reduction in Value and Number of Artworks ................ 20

Table 18 Top 10 Artists by Market Capitalization without Sales Records in 2011 ........................................ 21

Table 19 Most Valuable Living Artists ........................................................................................................... 21

Table 20 Skate’s Top 5000 Living Artists Who Passed Away in 2011 ............................................................ 22

Skate’s Art Stocks Review ............................................................................................................................... 23

Calendar of Conferences and Other Events in which Skate's Will Participate in 2012 .................................. 25

2

Introduction

Welcome to the 2011 Annual Art Investment Report

by Skate’s. Published by Skate’s Art Market Research since 2006, this report covers global art market

trends and provides forecasts for the coming year.

Our coverage is focused on the universe of global

artists (674 names as of December 30, 2011) whose

works are represented in Skate’s Top 5000, our database of the world’s most valuable art based on auction prices. We also follow all publicly traded art

funds and companies operating in the art industry

around the world, tracking their performance with

Skate’s Art Stocks Index.

To learn more about Skate’s Top 5000 and the artworks and artists represented, please download

Skate’s application for your iPad or visit www.skatepress.com. For art stocks and art funds

coverage, please visit Skate’s Art Stocks & Funds.

In this report, we focus on the world’s leading auctions with sales qualifying for entrance into

Skate’s Top 5000 in 2011 (the threshold price stands at $2.1 million as of December 30, 2011). Skate’s currently covers 30 auction houses globally, of which

Sotheby’s, Christie’s, Poly International Auction, Phillips and China Guardian Auctions are by far the

most significant contributors of works to Skate’s Top 5000.

The Art Market Will Decompose Into Investment and Consumer Grades

Art Securitization and e-Commerce to Drive

Growth for These Market Segments, Respectively

The Big Picture: Art Market Drivers—From Art as an Investment to Art as a Consumer Good

The concept of art as an investment has emerged

from something viewed as vulgar and inappropriate

less than ten years ago to the mantra of the art trade

today. It is a concept that has helped to drum up

demand for works in the midst of economic turmoil

and garner the attention of new buyers, thus

expanding the addressable market for art dealers

and auction houses.

When we founded Skate’s in 2004 and began talking about effective investment returns on works of art,

using financial terms such as “free float”, “peer group valuation” and “value enhancement” in conjunction with art, art trade practitioners were

often at a loss. Now, seven years later, we have a

good several thousand of them as subscribers and

enjoy close relationships with many professional art

organizations and businesses that have come to

embrace the investment approach to art buying and

selling. The idea of art as an investment has become

embedded in their thinking.

As recently as 2009 when Skate’s Art Investment

Handbook was published, even the well-known

name of the book’s publisher—McGraw-Hill—was

not enough to get the book into U.S. museum stores,

which maintained a ban on all art investment

literature. Throughout 2011, however, we have seen

the diffusion of “art as an investment” school of thought from the fringes of the finance world into

the mainstream view of what drives art purchases

and sales in an increasingly broad global art

marketplace. Fuelled by global economic

uncertainty, investors, lured by its asset protection

quality, have poured capital into fine art. The rapid

growth and globalization of art market participants

have clearly moved buy-side power to new money

that is interested in no-nonsense discussions of risk

and return, transaction transparency and ownership

costs, as well as other core aspects of art as

investment thinking. Access, social cache, personal

tastes, the electric magic of the auction room and

the dealer’s pitch are things that remain in play as factors related to art buying. Yet these factors are no

longer isolated from hard facts and financial

numbers.

We have long preached the advent of rational

thinking about art as an alternative investment class,

being used not to substitute but to compliment

traditional art buying practices. It has now arrived.

Now what?

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Skate’s believes that this arrival marks not the end but rather the beginning of a long and profound

change that will sweep the art market in the coming

decade. It will follow two distinct trends: segregation

of the investment quality art market and the rapid

transformation of a cottage art trade industry into

an increasingly efficient corporate structure, with

supply chain management and a retail system more

efficiently linking artists and consumers.

Segregation of the Investment Quality Art Market

In 2011 alone Skate’s estimates that there were over 2,000 transactions completed on the auction market

involving artworks priced at $1 million or more per

work. There were probably as many deals completed

in galleries and art fairs around the world as well. Art

trading volumes have grown close to $80 billion for

2011, having reached peak levels previously seen in

2006-2007 (the honorable professor of art

economics, Clare McAndrew, will publish her

numbers and analysis in the TEFAF report next

March, the macro bible for the art world).

No longer an anecdote, the multimillion dollar price

tag for a work of art coupled with the increased

austerity of public finances in the developed world,

specifically funds available to maintain major public

museums, makes it only a matter of time before the

public consciousness will awaken to the fact that

museums are no longer pillars of national culture

and pride requiring government subsidies and

private donors to survive. These institutions will

instead be seen as government-owned treasuries

that can help balance government deficits by using

capital markets and modern finances to unlock the

value of their vaults without necessarily selling

significant volumes of art treasures (“de-

accessioning” in museum terminology). Cash from

capital markets can be used to finance museum

budget deficits.

Closely watching capital flows from the technology

world and emerging market riches into art, Skate’s believes that the art market will become saturated

at a trading volume below $100 billion per annum

with no massive new capital inflows to be seen into

art from the world’s high net worth individuals. In

fact, following the long market bonanza caused by

the end of the Cold War, the advent of global trade

and the emergence of the BRICs, the global art

market will land on the same plateau as it was

immediately following the Japanese speculative

buying spike in the 1980s.

The art funds of today give weak hope. While the

numbers can vary, fewer than 100 art funds are

open to outside investors globally. Furthermore,

their art purchases do not even account for 1% of

total art purchases worldwide. The London-based

research firm ArtTactic, which is run by our

respected competitor and friend Andres Patterson,

believes that the money under management in the

art funds industry grew by nearly 50% in 2011 to $1

billion, although we see many of those funds as

more reminiscent of certain individuals’ structured art holdings than truly transparent collective

investment vehicles. At Skate’s we have managed to establish coverage of only a dozen art funds to date,

most of which remain as secretive and as weakly

transparent as the market they operate in. Unless a

major change is forthcoming, this is not the way to

grow a collective investment industry.

Yet change will come, and we expect it to come from

museums. Investment banks have to make money,

but museums must look for novel ways to fund their

operating budget deficits in an era where Western

public finances can only be considered a mess. It is

only a matter of time before art securitization will fly

in earnest. One only has to imagine a $1-2 billion art

fund based on a small part of a major museum art

collection, widely supported by authorities as a

government deficit-reducing initiative and marketed

as an asset protection investment product to retail

investors worldwide. Although not a Zynga or

Groupon IPO, it could still sell well and definitely

have an enviable NAV and liquidation value.

The infrastructure is there; one only has to look at

the art securitization experience of Russia’s Fotoeffect or the UBS-structured Ancient Coins Fund

for evidence. Once the pilot works, there would be

an avalanche of museum-led securitizations

expanding the art funds industry from $1 billion to

$10 billion in a few years time. A clear preference is

emerging for institutional dealing with big ticket

artworks, as these bring reduced transaction and

4

due diligence costs for the funds and their

management companies.

The premium segment of the art market—which we

benchmark with Skate’s Top 5000 peer group of the world’s most valuable works of art at auction prices with a current threshold price of $2.136 million and

a combined value (market cap) of $30.5 billion—should clearly evolve into an investment market of

its own. It will see significant liquidity improvement

once museum-lead art securitizations materialize.

This segregation of the art market’s premium segment is already clearly seen as more capital has

been committed to pre-auction guarantees and art

lending in 2011. This capital has mostly gone to

support trades involving high value art, thereby

reducing the relative cost of due diligence and other

expenses (as in every proper financing deal, more or

less the same amount of work goes into a deal

regardless of its size). The availability of such

guarantees and lending facilities contribute to the

liquidity of the high value segment of the art market,

which helps to widen the gap between the market

for well-established artists and their major works on

the one hand, and less universally accepted artworks

on the other.

Strategically, this trend would give a huge boost to

the high-end auction market oligopoly of Sotheby’s and Christie’s. If they manage to recognize that soon, they may want to stimulate museum-led art

securitizations before their “new money” driven growth of recent decade flattens out over the next

few years.

Transforming Old Art Retail Habits into Modern Specialty Retail

As buying and selling art becomes less and less akin

to entering a temple and hearing from the gods, the

entire industry will have to reform to meet new

consumer patterns. This situation is very much

reminiscent of the shopping revolution in the 19th

century when the arrival of the first department

stores across France, the U.K. and the U.S. made

shopping more democratic and led to greater

consumption from more comfortable and hence

more enthusiastic customers.

The art fair bazaars and convenience stores of

today’s galleries will have to evolve toward new age art shopping concepts in the same way that old

markets and specialized stores transformed into

department stores and retail chains. Incumbents, of

course, will remain but their market share will

diminish and they will have little ability to respond to

changes in consumer habits and preferences.

New retail formats, including online ones, (for a

detailed discussion of art e-commerce, please see

section 2 of this report below), focus on brands and

cleverly managed choice. The introduction of

efficient procurement, supply chain and inventory

management practices supported by the ability to

compete on scale and enjoy access to low-cost

working capital will bring the global art trade to the

masses of tomorrow in lieu of a nice gallery next

door.

There is already a first mover in the space with

Gagosian definitely heading in this direction. The

branding requirement has already been met—Gagosian knows how to produce contemporary

artists and use modern marketing techniques to his

advantage. Procurement (a clever artist signing

process, management of artist foundations and

other tricks of the trade that contribute to success)

and scale (international offices definitely resolve the

issue of global distribution and sideline competing

dealers) are also taken care of. Skate’s expects that once Gagosian hits the very same plateau that we

mention above for high-end art, the firm will refocus

on pushing lower ticket art through its distribution

channels, thus transforming most of its galleries into

new age art department stores available to the

masses. Succession planning (or lack thereof) is

probably the only challenge that can kill the

Gagosian first mover advantage as things stand

today.

Other top notch galleries should follow this trend

once they exhaust the benefits from their march to

Asia and their quest for mysterious Russian or Arab

buyers. They should look for a more systematic way

of generating and growing trading volumes. High-

end art trading will require less retail attention and

more focus on the investment aspect, while steady

volumes could be achieved through reformatting

their product assortment (i.e., art) and store format

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to please crowds. A precondition thus exists for the

art department store revolution to take place in the

near future.

Art Market Migration to Online and Mobile Platforms

Given the core thesis above—that the art market will

quickly develop along the lines of a new-age

consumer product vertical with wide adoption of

modern distribution, marketing and retailing

practices in the coming years—the key to forecasting

the art industry’s evolution concerns how the incumbent art trade will embrace a consumerist

approach to art and adopt best practices for

electronic commerce.

Like figure skating, where athletes are rated

separately for artistic and technical skills, Skate’s has ranked art industry ventures for their artistic merit

(the existing position in the global art industry in

terms of overall volume and current e-commerce

capabilities) and their technical merit (simply based

on the art industry venture’s rank in internet traffic to date). We begin with technical merit—just as any

internet user would do—checking what art is being

sold online and by whom. The following section

outlines our findings.

Technical Merit

Technical merit should have been and indeed was

easy to assess. We have used the widely adopted

Alexa traffic measurement system to evaluate the

existing traffic ranking of the websites operated by

the world’s art industry companies. We have excluded pure media organizations, such as the arts

pages of The New York Times, The Art Newspaper,

Artinfo and our own humble site, instead

considering only those sites that trade art online

and/or offline or represent existing online and/or

offline art marketplaces today. The technical merit

ranking yielded some rather interesting results,

which are shown in Exhibit 1 below.

The most important takeaway from this assessment

is that, like elsewhere in the global migration of

retail trade online (with only food and art

successfully resisting so far), the pure plays with a

laser focus on online retail are prevailing, while

offline incumbents can fight back if they respond

early.

eBay (the world’s sixth most widely used website) has a towering presence. Unlike Amazon (the world’s fifth most frequented site), which has yet to bother

itself with arts and collectibles (“Arts, Crafts and

Sewing” is the closest Amazon category to art and is hardly worth visiting), eBay has spent a considerable

amount of time and money building an art e-

commerce vertical for its customers.

Table 1 Skate’s Top 30 Art Industry e-Commerce Leaders, Technical Merit*

Rank Site Traffic Worldwide Traffic in Local Country

1 eBay.com 20 6 (U.S.)

2 liveauctioneers.com 10,133 3,155 (U.S.)

3 artnet.com 11,152 5,412 (U.S.)

4 christies.com 11,771 5,867 (U.S.)

5 ha.com (Heritage Auctions) 19,436 4,962 (U.S.)

6 artprice.com 21,450 2,235 (France)

7 sothebys.com 24,363 20,421 (U.S.)

8 artfact.com 26,555 9,591 (U.S.)

9 saatchionline.com 30,682 21,460 (U.S.)

10 bonhams.com 43,883 25,168 (U.S.)

11 dorotheum.com 98,679 1,275 (Austria)

12 gagosian.com 109,112 69,345 (U.S.)

13 artbaselmiamibeach.com 113,473 16,364 (U.S.)

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14 artnet.de 129,984 10,506 (Germany)

15 phillipsdepury.com 138,780 89,545 (U.S.)

16 art.sy 177,752 54,185 (U.S.)

17 cguardian.com (China Guardian) 188,289 25,829 (China)

18 tajan.com 201,985 9,663 (France)

19 friezeartfair.com 231,721 78,300 (UK)

20 artbasel.com 251,816 49,671 (U.S.)

21 saffronart.com 265,409 40,234 (India)

22 igavelauctions.com 299,727 20,958 (California)

23 sedition.com 321,822 44,416 (UK)

24 polypm.com.cn (Poly Auction) 338,467 42,859 (China)

25 villa-grisebach.de 455,425 66,462 (Germany)

26 paddle8.com 459,417 108,814 (U.S.)

27 artprice.fr 672,105 26,622 (France)

28 welcometocompany.com 825,020 179,047 (U.S.)

29 heffel.com 831,797 14,204 (Canada)

30 vipartfair.com 1,068,563 n.a.

*Alexa rank as of December 18, 2011; Source: Skate’s, Alexa.com Skate’s has covered in detail how eBay got burned by its foray into the online art trade in

2000 with the scam related to Diebenkorn

artworks followed by the termination of its

partnership with Sotheby’s (unrelated to the Diebenkorn scandal) that had been in place

since 2002 (for more details, please see pg. 28

of Skate’s Art Investment Handbook). Yet for all

its misfortunes eBay still offers the best

infrastructure for the online art and collectibles

trade. As of today eBay has 38 market

categories (including one called “Everything Else”). Of those, seven can be classified as arts and collectibles. While eBay does not disclose

its financial results by category, the subgroup

called “Collectibles and Art” is the fourth most important group for the company after fashion,

motors and electronics. Technically speaking,

there is no better place to trade art than on

eBay.

However, there are two important obstacles,

excluding the issue of security and policing for

malpractices (such as wrong attribution) where

eBay has significantly improved over the years.

First, one eBay handicap is its inability to offer a

fusion between online and offline trading that

allows its users to see the art they want to

purchase at predefined and visually appealing

locations. As everyone in art trade knows, art

buying is all about an impulse of physical

contact and without one the eBay art

marketplace will be overlooked by the majority

of those who want to physically experience

their art before acquiring it. Second, eBay does

not curate its marketplace and is not

aggregating information resources supporting

art buying and selling decisions. Without those

information aides, distilling artworks from the

avalanche of graphic imagery, eBay’s art categories today bear more resemblance to a

flea market rather than an art marketplace.

Being a pure play focused on art e-commerce

definitely helps. Smart companies like Artfact

and Saatchionline, backed by savvy venture

capital in New England and Old England,

respectively, have managed to reach the top 10

websites measured by an online art buying

audience, thus bypassing established second

tier auctions, less sophisticated internet start-

ups and the world’s major art galleries.

Liveauctioneers.com and Heritage Auctions

have done a great job establishing a strong

name over the internet for themselves, an

achievement that may not be entirely obvious

to art professionals focused on the offline

world. The success of firms like

Liveauctioneers.com that can make a living by


7

focusing solely on enabling art and antiques

auctions with their technology (and having no

ambition to trade art of their own) provides a

clear statement that art e-commerce is quickly

developing into a sustainable and profitable

industry in itself.

Company pairs like the auction houses Christie’s and Sotheby’s and information providers artnet and Artprice have a very strong rivalry, with the

former having the advantage over latter in each

case. In the Christie’s vs. Sotheby’s case, Christie’s advantage is partially explained by aggressive buying of traffic with key words.

Searches for “buy art online” or “art for sale” or a dozen other similarly standard queries bring

web visitors to Christies.com as the topmost

sponsored listing (at least as of mid December

2011).

The brave experiments of Art.sy and

Seditionart.com, which launched only earlier

this year and have relied heavily on social

marketing, have managed to reach the top 30 in

no time. This achievement is particularly

respectable for Sedition, as it only offers a

purely digital art concept.

Art fairs (including virtual ones) obviously offer

no art trading today, but we included them here

to juxtapose the existing dominance of the Art

Basel brands (note separate slots for Art Basel

Miami Beach and Art Basel) versus VIP Art Fair

and to pinpoint the traffic gap that the New

York-based VIP Art Fair will definitely challenge

in 2012 under its new leadership (the

company’s new CEO, Lisa Kennedy, comes from an e-commerce background).

Artistic Merit

The classic debate about the art industry going

online has traditionally centered on the specific

art industry knowledge and expertise that the

incumbent trade has (and safeguards) and that

e-commerce challengers lack. eBay’s past failures and its current flea-market like art

listings remain the most widely used arguments

to defend the exceptionalism of the art industry

and how no stranger can possibly master an

online strategy for the art trade.

This “special mission” and “not-like-the-rest-of-

the-world” view of things is very close to us at Skate’s, a company coded with Russian DNA in a

country prone to such an “our own way” view of the world. We have seen this before. Resting

for too long on ones laurels and ignoring

massive technological and societal changes

often causes one to miss the revolution taking

place right in the backyard. With countries, the

best brains are drained away, leaving only a

legacy of grandiosity perception, a perception

that detaches itself further and further from

reality with each passing day. As for the art

industry, unless it responds quickly to changes

taking place online, the noble art experts will all

soon work for the brave new e-commerce firms,

and the transformation of the art trade into a

professional specialty retail trade will kill the old

business model of art dealing and thus benefit

newcomers who copy the efficient e-commerce

business models of other consumer verticals.

Following the core thesis of this report above—the art market’s expected decomposition into investment and consumer grades—Skate’s believes that specialty art knowledge will enjoy

less importance than the introduction of

modern retail practices like branding,

marketing, customer service and supply

chain/inventory management going forward. In

other words, to grow the art trade and bring in

more consumers companies will have to be

modern marketing experts first and art experts

second. Granted, the art trade’s movement online will only marginally affect trade in high

value items—the premium market will largely

remain as it is and will be further shaped by

wider acceptance of art as an investment asset.

The mass art trade, 95% of volume in terms of

the number of works traded and the number of

consumers involved, will migrate online, driven

not by specialty art knowledge, but by the

8

merger of art industry specifics with modern e-

commerce conventions.

eBay is the best suited company to benefit from

this migration. eBay’s market capitalization as of December 21 was $39.5 billion, which is 33%

more than the total value of the world’s Top 5000 masterpieces by auction prices, 20 times

more than the market cap of the world’s largest art industry company (Sotheby’s) and about 12 times more than the total market cap of Skate’s Art Stock Index of 13 global art industry listed

companies. Once eBay figures out how to play

the consumer part of the art market and move-

up its cache (and average transaction size) in

the space, it will be a difficult player to stop.

Going back to our figure skating analogy, we

have played a lot with the methodology we will

use to rate art e-commerce players. Our ratings

will capture such qualities as vetting for art

offered (e.g., no counterfeits, accurate

authentication and limited counterparty risk),

consistency of choice and its collector appeal

and ability to integrate various specialty

content-enhancing art buying and selling

decisions. But we have concluded that no

algorithm will work fairly. In figure skating, an

algorithm is used and there is always a scandal,

so we thought that to make it easier for

everyone, we can take the scandal without

disclosing our synthetic ranking methodology.

One thing is certain, however—we are not paid

by any of the firms profiled and have no

conflicts of interest.

In Exhibit 2, we included our top five picks for

art e-commerce companies to watch. This is the

product of our Technical Merit ranking

normalized for specific art industry knowledge

(Artistic Merit) and based solely on our

subjective analysis. The most important caveat

is that we have excluded Sotheby’s and Christie’s here because their stated objective is

to focus on high-end items, and they have a lot

to win by doing so as discussed in the first

section of this report. Sotheby’s and Christie’s should not devalue their brand and trade their

oligopoly position in high-end investment grade

art for the benefit of long term e-commerce

growth, regardless of their ability to play this

game perfectly well.

Table 2 Skate’s Top 5 Art e-Commerce Leaders to Watch*

Rank Name Skate’s Rating (0-10) Note

1

9.975

The firm’s size is comparable to that of the entire art

industry, and it has best in class e-commerce skills and long

experience servicing the arts and collectibles market. It

must reposition itself in the art space and implement on

strategy to move itself upwards in value chain. This will

happen either organically or through an acquisition.

2

8.375

A listed company with an excellent product offering,

including both e-commerce and content, it has a stellar

track record with no reported fakes or wrongly attributed

works. artnet’s disappointing volumes are largely explained

by a lack of modern e-commerce skills and need for a

revamped business model and/or the introduction of

professional e-commerce management talent.

3

7.750

A clear market leader after eBay with strong technological

leadership, including those for mobile applications and the

world’s largest inventory sourcing and vetting ability, the company needs to introduce a B2C unit to build professional

retail offering on top of successfully executed B2B solution

for its venders.

9

4

7.250

The most aggressive and successful art auction that has

consciously focused on an online strategy. The company’s business model will remain handicapped until HA.com

repositions itself as an art retail business and adopts focus

on proper merchandising, more efficient product

assortment and best in class e-commerce CRM. It should

also aim to bridge the traffic gap with Liveauctioneers.com

quickly, as this gap remains too wide.

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6.775

A firm backed by venture capital that initially made the right

move to aggregate various value-adding content but has

somehow failed to reap benefits from full trading and

content functionality integration. It has lost significantly to

Liveauctioneers.com on traffic and HA.com on consumer

focus.

Skate’s rank as of December 18, 2011; Source: Skate’s Art Market Research

2011 Art Market Overview

Skate’s Top 5000 total value reached $30.5 billion, and the ranking’s threshold price broke the $2 million

level.

Average annualized investment returns on the world’s masterpieces peaked at 4.82%*, confirming the

strong performance of exceptional artworks amidst global economic turmoil.

Skate’s Art Stock Index had its worst year since 2008, losing 15% in value in 2011. This performance came

despite robust auction volumes, with the index’s flagship stock Sotheby’s shedding over one-third of its

value in 2011, producing a -35.5% return for its shareholders for the year as of December 23, 2011.

*As measured with repeat sales at auctions, includes auction fees but excludes ownership and

transportation costs, before taxes.

Perhaps, the key outcome is that throughout 2011

the art market has resisted pervasive global

economic turmoil and instability, with its high-end

segment growing on every measure in 2011

compared to 2010 (see Table 3 and next page for key

results). Driven by a record 119 repeat sales

registered within Skate’s Top 5000 in 2011, the

weighted average returns on Skate’s Top 5000 grew

to an all-time high of 4.82% per annum. Sellers

exiting the market in 2011 saw annualized returns of

7.20% on their works.

Today, to merit entry into Skate’s Top 5000, an

artwork must sell for more than $2.1 million at

auction; 721 such works did so in 2011 for a

combined value of $4.3 billion. These new entries

represent a very diverse universe of 250 different

artists, 81 of whom had no prior record in Skate’s Top 5000. We note a pattern clearly reminiscent of

2006/2007, when booming demand for high-end art

coupled with a scarcity of works from established

names helped to bring multimillion dollar valuations

to “second choice” artists. As a result, art dealers

and auction houses were and are again now able to

establish price records for less well known art and in

the process feed more names into the pantheon of

the world’s most valuable art.

Typical of such boom times, we have observed a rise

in the presence of living artists, female artists and

artists from BRIC countries. In 2011, 59 new living

artists and 10 new female artists entered Skate’s Top 5000. Notably, 82 BRIC representatives—primarily

Chinese artists—significantly increased their share in

the rating compared to last year. These artists also

occupied top places along with artists who have long

held established auction market records. The only

slight decline was noticed in the average price paid

per work created by BRIC artists: $6 million in 2011

versus $6.2 million in 2010.

10

Table 3 Skate’s Top 5000 Key Metrics in 2011 versus 2010

Benchmarks 2011 2010

Number of new entrants*

in 2011 721 588

Total value of new entrants, USD 4,308,313,384 3,629,214,346

Number of artists behind new entrants 250 223

Number of new artists**

81 47 (since 31-May-10)

Number of living artists among new entrants***

59 46

Number of female artists among new entrants 10 8

Number of BRIC artists among new entrants****

82 53

Number of repeat sales 119 117

Weighted average ERR of repeat sales*****

, annualized % 7.20 7.13

Source: Skate’s Art Market Research

*New entrant – an artwork included in Skate’s Top 5000 with its most recent auction price record achieved in 2011

**New artist – an artist who had no representation in Skate’s Top 5000 at the time his/her work’s sale on the auction

market qualified it for entry into Skate’s Top 5000 ***

Living artist – living as of the date of related auction sale ****

Artists attributed to BRIC on the basis of their place of birth (i.e., Brazil, Russia, India or China) *****

Weighted average effective rate of return calculated for the entire statistical set of Top 5000 repeat sales records

with weights assigned on the basis of the initial purchase price (including buyer’s premium), converted to USD (for non-USD sales) on the basis of the exchange rate at the time of sale

Table 4 Skate’s Top 5000 Peer Group: Key Data Points

Benchmarks 2011 2010

Total value, USD (aggregate auction prices paid) 30,528,112,812 27,630,454,263

Weighted average ERR annualized, % 4.82 4.24

Percentage of trades being repeat sales, % 12.5 12.3

Percentage of volume being repeat sales, % 14.1 13.9

Number of artists with more than 1 trade 361 358

Number of artists with more than 5 trades 174 154

Threshold price, USD (the value of the 5000th

artwork) 2,136,000 1,870,000


11

Table 5 Skate’s Achievement of the Year Awards

Achievement Name Comment

Artist of the Year Zhang Daqian

The biggest gain in Skate’s Top 5000 in market

capitalization and the largest # of artworks traded in 2011

in Skate’s Top 5000 price range

Female Artist of the Year Tamara de Limpicka

Born in Moscow as Maria Gorska, Tamara de Limpicka

became the most actively traded female artist in 2011

within Skate’s Top 5000 pricing range, achieving a

weighted average ERR of 13% on five repeat sales

Artwork of the Year Eagle Standing on Pine

Tree

Work by Qi Baishi was sold at China Guardian Auction for

$65,532,112 on May 22 and became the most valuable

artwork sold on the auction market in 2011, now ranked #

15 in Skate’s Top 5000

Best Exit of the Year

ERR of 93.82% on

Three Years’ Investment in Lady in Solitude by Fu Baoshi

The artwork was purchased for $262,830 in 2008 and sold

for $1,932,217 on April 5, 2011, yielding an annualized

investment return of almost 94%

Worst Exit of the Year

Negative ERR of -

18.13% on Three Years’ Investment in Still Life with Mirror by Roy

Lichtenstein

The artwork was purchased for $9,599,371 in 2008 and

sold for $5,800,000 on May 12, 2011, yielding an

annualized investment return of -18% and a direct loss of

$3.8 million on this investment

Supply Problem of the Year Vincent van Gogh The largest artist by market capitalization who had no

single auction record within Skate’s Top 5000 in 2011

Disappointment of the Year Damien Hirst

The most valuable living artist of those who had no

auction sale record in 2011 within Skate’s Top 5000

pricing range (over $2 million per artwork)


Another very important and healthy trend for 2011

has been the crystallization of repeat sale liquidity

around a growing number of artists. The number of

artists with more than five repeat sales records in

Skate’s Top 5000 has increased by 13% to 174

names. As a result, trading in high-end art is

becoming ever more diverse with more

benchmarking data available for potential buyers.

This trend is essentially harmonizing a larger portion

of the art market and giving it greater transparency

through the availability of price records and

historical investment returns data.

Art Market Liquidity Amid a Chinese Bubble?

The total volume of premium segment art

transactions in 2011 was $4.3 billion and represents

a remarkable 18.7% trading volume increase within

Skate’s Top 5000 category in 2010. Increased trading

in high-end Chinese art was a primary driver for this

volume increase in 2011; art produced by Chinese

artists comprised a full 50% of trading within Skate’s Top 5000 price range (above $2 million per artwork).

Zhang Daqian tops the list, and Wu Guanzhong is

rapidly gaining appreciation (see Table 4 for more

details).

As shown in Table 5, five out of the ten artists with

the biggest 2011 increase in their market

capitalization in Skate’s Top 5000 (aggregate value of

auction prices paid for their artworks included in Top

5000) were Chinese.

12

Early in 2011 Skate’s was the first to point out the

rapid formation of a deep and very speculative

market for Zhang Daqian’s art, as Daqian in literally

no time became the 20th

most valuable artist in our

ranking (see Skate’s Market Notes, April 18, 2011). In

2011, his sales volumes tripled compared to 2010,

and he became the most actively traded (by number

of works) artist in the global art market’s high-end

price range, with 54 artworks sold at auction at or

above $2 million per work. In dollar terms, this was

enough to put Zhang Daqian right behind the world’s dominating duo of Picasso and Warhol as the world’s most traded artists with a total value of auction sales

in Skate’s Top 5000 price range of $247.9 million for

2011 alone. And, if this is not enough, Zhang Daqian

gained more value in his Top 5000 representation in

dollar terms than any other artist in 2011, overtaking

Picasso and Warhol by this measure as a significant

number of their artworks exited Skate’s Top 5000

during the year (see pgs. 12-13 for more).

Zhang Daqian was not the only Chinese artist to

make a splash in 2011. Qi Baishi scored the record

auction sale for 2011 when his painting Eagle

Standing on Pine Tree sold for $65.5 million and

became the 15th

most expensive artwork of all time

to be sold at auction. The third most frequently

traded artist this year in terms of number of

artworks sold at Skate’s Top 5000 prices was Wu

Guanzhong. The artist passed away in June 2010 at

the age of 90, an event which set a speculative

bubble in motion, comparable in zeal to the Daqian

frenzy. In 2011 alone, there were 27 new entries of

his artworks to Skate’s Top 5000 with an overall

volume of $141 million. The most valuable painting

by Wu Guanzhong is Ten Thousand Miles of the

Yangtze River, which was sold for $23.5 million in

Beijing at an obscure local house—A&F Auction—on

November 19 of this year. Wu Guanzhong is now

ranked as the 44th

most valuable artist by Skate’s, right after Cy Twombly who passed away this year

(as did Lucian Freud, another major contemporary

artist—currently ranked as the 30th

most valuable

artist after his exit from the living artist category this

year).

Given the significant losses of living artists in the top

tier category, Gerhard Richter’s dominance of the

segment only solidified in 2011. Richter’s ascent was

relentless, with price records being achieved

throughout 2011. Like Picasso, Richter saw 26 of his

paintings sold in Skate’s Top 5000 category (and

unlike Picasso, he actually was able to watch that

this year); seven of these were repeat sales. The

resulting market capitalization increase of $147.4

million moved him even further away from his

contemporaries as the most valuable living artist

today, and positioned him as the 14th

most valuable

artist of all time, right below William de Kooning and

above Fernand Léger. Richter’s Abstraktes Bild series

made a major contribution to the growth of his

market capitalization, including his record painting

sale for $20.8 million in November of this year (a

detailed analysis of the Abstraktes Bild series was

presented in Skate’s October Report).

Finally, we must note the exceptional liquidity of

Warhol, Monet, Picasso, and Richter as the market

leaders by number of repeat sales within Skate’s Top

5000 price range—artists whose works offer a

striking contrast between liquidity (established

names) and speculative volumes spikes (Chinese

names for which repeat sales happen far less often).


http://www.skatepress.com/files/Skates_Art_Industry_Investment_Report_Oct_2011_English.pdf

13

Table 6 Ten Most Active Artists by Number of Artworks Traded Within Top 5000 Price Range

Artist

Number of

Transactions in

2011

Artist Trading Volume

in 2011, USD Artist

Number of

Repeat Sales

in 2011

Zhang Daqian 54 Andy Warhol 282,616,663 Andy Warhol 9

Andy Warhol 34 Pablo Picasso 278,385,966 Claude Monet 8

Wu Guanzhong 27 Zhang Daqian 247,861,601 Pablo Picasso 7

Pablo Picasso 26 Gerhard Richter 170,900,498 Gerhard Richter 7

Gerhard Richter 26 Francis Bacon 143,616,052 Jean-Michel Basquiat 4

Fu Baoshi 16 Wu Guanzhong 141,074,649 Alexander Calder 4

Qi Baishi 14 Qi Baishi 131,567,273 Fernand Léger 3

René Magritte 13 Clyfford Still 112,807,500 René Magritte 3

Zao Wou-Ki 13 Xu Beihong 72,051,690 Alberto Giacometti 3

Jean-Michel Basquiat 12 René Magritte 69,527,470 Zhang Daqian 3


Table 7 Biggest Changes in the Artists’ Market Capitalization of Skate’s Top 5000 in 2011

2011 2010

Artist

Total Volume

in Skate’s Top 5000, USD

Market Cap Growth

in Skate’s Top 5000,

USD

Artist

Total Volume in

Skate’s Top 5000, USD

Market Cap Growth in

Skate’s Top 5000 (31-

May-10 to 31-Dec-10),

USD

Zhang Daqian 348,764,582 265,025,731 Andy Warhol 1,285,991,395 178,896,059

Andy Warhol 1,487,446,640 201,455,245 Amedeo

Modigliani 640,640,637 118,287,114

Pablo Picasso 3,079,450,342 199,939,770 Pablo Picasso 2,879,510,572 84,154,842

Qi Baishi 196,144,190 161,227,337 Henri Matisse 798,992,611 81,139,039

Gerhard

Richter 504,304,381 147,381,744 Roy Lichtenstein 343,765,381 76,448,454

Wu Guanzhong 165,903,289 139,041,878 Zhang Daqian 83,738,851 70,037,426

Francis Bacon 872,327,719 133,696,100 Gerhard Richter 356,922,636 44,140,904

Clyfford Still 161,872,500 108,976,000 Joseph Mallord

William Turner 153,891,556 43,251,453

Xu Beihong 126,177,798 71,426,086 Xu Beihong 54,751,712 33,365,294

Wang Meng 86,830,323 62,118,990 Sir Lawrence

Alma-Tadema 43,103,348 33,170,000


14

Table 8 Ten Most Valuable Artists in Skate’s Top 5000 (as of December 30, 2011)

2011 2010

Artist Total Volume in

Skate’s Top 5000, USD Artist

Total Volume in

Skate’s Top 5000, USD

Pablo Picasso 3,079,450,342 Pablo Picasso 2,879,510,572

Claude Monet 1,499,676,670 Claude Monet 1,490,411,425

Andy Warhol 1,487,446,640 Andy Warhol 1,285,991,395

Francis Bacon 872,327,719 Henri Matisse 798,992,611

Henri Matisse 809,719,353 Francis Bacon 738,631,619

Alberto Giacometti 692,370,280 Pierre-Auguste Renoir 705,763,264

Pierre-Auguste Renoir 679,480,108 Paul Cézanne 671,806,902

Paul Cézanne 675,024,147 Alberto Giacometti 662,775,287

Amedeo Modigliani 649,602,657 Vincent van Gogh 641,473,627

Vincent van Gogh 635,416,127 Amedeo Modigliani 640,640,637


Table 9 Top Five Auction Prices Paid in 2011

Top 5 Artworks Sold in 2011

Artist Qi Baishi Wang Meng Clyfford Still Roy Lichtenstein Francesco Guardi

Title Eagle Standing

on Pine Tree Landscape 1949-A-No. 1

I can see the

whole room!...

and there's

nobody in it!

Venice, a view of the

Rialto Bridge, looking

north (from The

Fondamenta del carbon)

Medium Painting Ink and color

on paper Oil on canvas

Oil and graphite

on canvas Oil on canvas

Size, cm 265.9 x 100.1 119.9 x 54.1 236.2 x 200.7 121.9 x 121.9 119.9 x 203.7

Auction House China Guardian

Auctions

Poly

International

Auction

Sotheby's Christie's Sotheby's

Auction Date 22-May-11 04-Jun-11 09-Nov-11 08-Nov-11 06-Jul-11

Estimate, USD - - 25,000,000-

35,000,000

35,000,000-

45,000,000 24,111,000-40,185,000

Premium Price, USD 65,532,111 62,118,990 61,682,500 43,202,500 42,913,160


15

Investment Potential of Art in Skate’s Top 5000: ERR Results of 2011

In the previous section, we discussed general art

market indicators that provide evidence of the

market’s continued strength, at least in its high-end.

Further analysis will focus on repeat sales within

Skate’s Top 5000 and the investment returns they have produced throughout the year.

In 2011, there were a total of 119 repeat sales that

entered Skate’s Top 5000, producing an average annualized effective rate of return (ERR) of 7.20%.

The average holding period in 2011 declined by one

year over 2010 to 8.4 years, meaning that collectors

are becoming more willing to consign works to

auctions. The same three artists as last year saw the

highest number of repeat sales: Andy Warhol,

Claude Monet and Pablo Picasso. These artists,

however, are not found in the list of the highest

weighted average ERR results in Skate’s Top 5000

that appears at the end of this section. Their

frequent appearance on the market—as opposed to

outliers that occasionally bring high results—signifies

blue chip status providing more modest but still

positive and stable returns and symbolizing the

value-preservation quality of Warhol, Monet and

Picasso art.

Stable and positive returns on repeat sales are a

strong selling point for Gerhard Richter, an artist

whose works regularly appear on the market,

including as repeat sales. On average, his works have

generated a 23% return to owners after an average

holding period of six years, once again confirming

the attractiveness of contemporary art provided by

the artists who will enjoy the highest value creation

potential during their lifetime.

Zhang Daqian had three repeat sales, all of which

generated double-digit returns (27% on average) and

helped to heat the market for his art; Daqian is the

Chinese artist with the most repeat sales within

Skate’s Top 5000.

Table 10 Repeat Sales Data: 2011 vs. 2010


*This figure indicates the number of repeat sales that occurred only throughout the stated year. It also serves as a

basis for two of the following criteria: holding period and ERR.

**The general benchmark that considers all previous ERR results in Skate’s Top 5000 up to the stated date.

Indicators 2011 2010

Total number of repeat sales*

119 117

Average holding period, years 8.4 9.4

Weighted average ERR for repeat sales of the year, annualized % 7.20 7.13

Overall Top 5000 weighted average ERR, annualized %**

4.82 4.24

16

Table 11 Ten Most Liquid Artists (Greatest Number of Repeat Sales by Years)

2011 2010

Artist Number of Repeat Sales in 2011 Artist Number of Repeat Sales in 2010

Andy Warhol 9 Andy Warhol 11

Claude Monet 8 Pablo Picasso 6

Pablo Picasso 7 Claude Monet 5

Gerhard Richter 7 Henri Matisse 5

Jean-Michel Basquiat 4 Fernand Léger 4

Alexander Calder 4 Jean-Michel Basquiat 4

Fernand Léger 3 Auguste Rodin 3

René Magritte 3 Gerhard Richter 3

Alberto Giacometti 3 René Magritte 3

Zhang Daqian 3 Alexander Calder 2


Table 12 Five Best Exits from Art Investments in 2011

Top 5 Best ERR Results in 2011

Artist Fu Baoshi Zao Wou-Ki Chu Teh-Chun (Zhu

Dequn) Gerhard Richter Sigmar Polke

Title Lady in Solitude 2. 11. 59. Composition no.

143 Abstraktes Bild Untitled

Date of sale 05-Apr-11 28-May-11 26-Nov-11 09-Nov-11 09-Nov-11

Initial investment, USD 262,830 600,000 776,724 1,248,000 258,068

Holding period, years 3 4 2 6 6

Exit price, USD 1,932,217 4,648,096 1,925,913 12,500,000 1,850,000

ERR, % 93.82 65.80 56.57 42.18 40.48


17

The domination of Chinese artists is particularly

noteworthy when looking at the ERR results of 2011

in Table 10. While last year only one representative

of China resided among the artists with the highest

results (Two Pigs by Xu Beihong, which brought a

34.84% ERR), this year Chinese artists occupied the

top three places in the rating. Notably, the very

short holding period that usually prevents artworks

from realizing their full investment potential did not

affect the sales results of paintings by Fu Baoshi, Zao

Wou-Ki and Chu Teh-Chun; on average, these

produced returns of 72%. Short holding periods,

insane ERRs and a limited number of repeat sales

records are all the signs of the speculative nature of

the Chinese art market, reminding us once again that

financial wisdom requires us to expect significant

risks wherever there are high returns.

Gerhard Richter is presented in the list of the highest

ERRs for the second year in a row as his Abstraktes

Bild painting garnered a return of 42.18%. Last year,

though, a work from the same period achieved an

even higher return of 45.58%.

The fifth artist in the list above is Sigmar Polke, the

modernist painter who passed away in June 2010 at

the age of 69. Previously, he had only two paintings

that sold above $2 million, but in 2011 the art

market saw an increased supply of his works in

accordance with a typical post-mortem spike in

market activity. As a result, Skate’s Top 5000 saw eight new entries by Polke in 2011. One of the

paintings—Untitled—was a repeat sale that sold

above the high estimate and generated an

annualized ERR of 40.48%, the artist’s first repeat sale benchmark in the high-end price category.

Table 11, showing the five worst returns produced

by repeat sales of works in 2011, demonstrates how

unfortunate timing can destroy the value of one’s art investment, with works by Roy Lichtenstein and

Andy Warhol being the most striking examples.

While their paintings continue to bring some of the

highest prices on the market, and both artists are

very liquid in the high-end price category, the

combination of wrong timing and massive irrational

premium paid at purchase created the basis for

humiliating returns. In 2010, Lichtenstein was

already on this list of worst returns after his Modern

Painting with Fishes produced an ERR of -10%. This

year, the outcome was even worse: the painting Still

Life with Mirror generated the lowest return (-

18.3%) after a 3-year holding period. These data

points speak not so much about “problems” with Lichtenstein’s market but rather epitomize the

irrational premium that Lichtenstein’s iconic art can

command, affecting less experienced art investors

that are not trained (or prepared) to accept a longer

investment horizon when making significant

purchases of modern art.

Andy Warhol’s market experienced a noteworthy

negative benchmark when Rorschach (in 2 parts)

generated an ERR of -14.65% and set the record for

the worst return on a Warhol investment made

within Skate’s Top 5000 price range.

The painting by Lucas Cranach (The Younger) also

illustrates a vivid example of art investment rules.

Purchased at a record price, the painting was quickly

returned to the market last year and, of course,

failed to find a buyer on such short notice. This past

month there was a second attempt to sell the

painting at Sotheby’s, which, while successful, brought an unfortunate loss of -14.46%.

Skate’s views the markets of the two other artists in

this rating—Tom Wesselmann and Eva Hesse—as

still too undeveloped to draw any firm conclusions

today.

18

Table 13 Five Worst Investments in Art Realized in 2011

Top 5 Worst ERR Results in 2011

Artist Roy

Lichtenstein Andy Warhol

Lucas Cranach (The

Younger)

Tom

Wesselmann Eva Hesse

Title Still Life with

Mirror

Rorschach (in 2

parts)

Portrait of a lady,

three-quarter length,

in a green velvet and

orange dress and a

pearl-embroidered

black hat

Great American

Nude no.21

Untitled (Bochner

compart)

Sale date 12-May-11 28-Jun-11 07-Dec-11 11-May-11 08-Nov-11

Initial investment, USD 9,599,371 5,417,000 3,655,348 4,114,500 3,064,000

Holding period, years 3 4 4 2 4

Exit price, USD 5,800,000 3,096,724 1,858,516 2, 900,000 2,350,000

ERR -18.13% -14.65% -14.46% -13.60% -6.06%


Table 14 All Time ERR Records (Based on Repeat Sales within Skate’s Top 5000)

2011 2010

Artist Weighted Average

ERR, % *

Artist

Weighted

Average ERR, %

Isamu Noguchi 190.20 Isamu Noguchi 190.20

Frans Hals I 114.25 Yue Minjun**

147.16

Auguste Rodin 81.64 Frans Hals I 114.25

Zao Wou-Ki 65.80 Auguste Rodin 89.72

Fu Baoshi 64.63 Damien Hirst 53.77

Chu Teh-Chun (Zhu Dequn) 56.57 Francis Bacon 51.60

Damien Hirst 53.77 Master of the Legend of Saint Barbara 46.38

Francis Bacon 48.45 Tom Wesselmann 42.87

Sigmar Polke 40.48 Isaak Ilych Levitan 38.05

Fang Lijun 39.71 Boris Mikhailovich Kustodiev 37.51


*This indicator shows the weighted average ERR results of artists, including all of their repeat sales up to the stated

year.

** This related artwork left Skate’s Top5000 as its auction price is now below the threshold price for Skate’s Top 5000

peer group.

19

Table 15 Female Artists in Skate’s Top 5000

# Artist Market Cap, USD Volume in 2011,

USD

Number of

Repeat Sales

Weighted

Average ERR, %

1 Joan Mitchell 87,397,339 14,333,000 7 27.16

2 Natalia Sergeevna Goncharova 71,266,185 12,723,002 1 30.55

3 Tamara de Lempicka 60,620,404 19,875,404 5 12.99

4 Mary Cassatt 41,341,500 0 1 -0.07

5 Louise Bourgeois 39,842,193 15,367,500 0 -

6 Georgia O'Keeffe 37,674,000 4,981,000 2 5.75

7 Agnes Martin 24,973,500 0 0 -

8 Eva Hesse 13,956,698 2,714,500 2 -5.16

9 Frida Kahlo 13,874,250 0 0 -

10 Irma Stern 11,507,521 7,753,119 0 -


Column #1 shows the rank of female artists in Skate’s Top 5000

Column #3 shows Market Capitalization in USD and reflects the aggregate value of Top 5000 works in nominal values

Column #4 shows 2011 trading volume on the auction market in USD (only for artworks eligible for entry into Skate’s Top

5000 in terms of market value)

Columns #5-6 show the number of repeat sales and ERR (weighted average effective rate of return, annualized, %) based on

historical statistics of the artist’s repeat auction sales (brackets reflect negative returns).

At the end of 2011, we can see that the world of

female artists in Skate’s Top 5000 remains small but quite diverse. This year almost every member of this

rating showed some unique activity. Joan Mitchell

once again topped the rating in terms of overall

volume in Skate’s Top 5000, although 2011 saw

other female artists showing significantly higher

activity in comparison to 2010. As a result, Mitchell

ranked only third by trading value in 2011, achieving

$14.3 million in volume. The most valuable artist of

the year was Tamara de Lempicka, whose five

entries to Skate’s Top 5000 brought $19.9 million.

Born in Moscow as Maria Gorska from Polish

parents, married in St Petersburg, Russia and raised

as an artist in France, Tamara de Lempicka

represents one of the very appealing stories for a

growing contingent of Russian, Polish and female art

buyers, making her a name to watch in the coming

years.

Second place in market activity in 2011 belongs to

Louise Bourgeois, an artist who passed away in May

2010 and is thus going through the same post-

mortem market spike as the markets for Wu

Guanzhong and Sigmar Polke described above. Her

three works generated particular interest and

brought a volume of $15.4 million.

Russian painter Natalia Sergeevna Goncharova

remained the world’s second most expensive female

artist; her two sales that entered Skate’s Top 5000

sold at prices significantly above their pre-auction

estimates and added $12.7 million to her record in

Skate’s rating. This year no repeat sales of works by

Goncharova took place, so she still has only one

repeat sale record, which brought an ERR of 30.55%

in 2008.

Leaving Skate’s: Value Reductions and Exits

In this section of the report, we focus on the artists

and works that were challenged by the new inflow of

more expensive art and as a result were forced out

of Skate’s Top 5000. As we noted at the beginning of

the report, the trading volume of 2011 significantly

exceeded that of 2010, which meant a substantial

number of lower value artists had to step aside to

make room for more valuable entries. In 2011,

20

Skate’s Top 5000 lost 59 artists, nearly double the

figure for the previous year. Seven of these names

were living artists.

It is worth noting that the artists who gained the

most value this year at the same time saw the

greatest number of works drop out of Skate’s Top 5000. Pierre-Auguste Renoir, Claude Monet and

Pablo Picasso were most affected by this trend,

losing 19, 14 and 13 works, respectively. The lost

volume seen by these three artists proved to be

even more of a disappointment.

Poor performance was also demonstrated by Camille

Pissarro. Given that he only had one entry to Skate’s Top 5000 in 2011—L'Hermitage en été, Pontoise sold

for $4.3 million—the loss of $17.5 million

significantly affected his market capitalization.

Finally, there were no auction records above $2

million for works by Damien Hirst. Instead, eight of

his artworks were ousted from Skate’s Top 5000, thus reducing his overall volume by $15.4 million.

Table 16 Revolving Door: Artists Represented in Skate’s Top 5000 of Artworks by Auction Prices

Table 17 Top 10 Losers: Artists with the Greatest Reduction in Value and Number of Artworks*

Artists with Greatest Reduction in Number of

Works in Skate’s Top 5000

Artists with Greatest Reduction of Value of Works in

Skate’s Top 5000

Pierre-Auguste Renoir -19 Pierre-Auguste Renoir -26,283,155

Claude Monet -14 Camille Pissarro -17,500,748

Pablo Picasso -13 Damien Hirst -15,361,701

Roy Lichtenstein -10 Jean Dubuffet -13,849,117

Camille Pissarro -10 Sir Alfred James Munnings -12,653,516

Damien Hirst -8 Giovanni Giacometti -10,268,878

Jean Dubuffet -7 Canaletto -10,100,906

Edgar Degas -6 Franz Kline -9,169,000

Georges Braque -6 Jasper Johns -8,202,000

Sir Alfred James Munnings -6 Georges Seurat -8,061,829


*As represented in Skate’s Top 5000

Top 5000 Benchmarks 2011 2010

Number of Artists Eliminated 59 32

Number of Living Artists Eliminated 7 3

21

Table 18 Top 10 Artists by Market Capitalization without Sales Records in 2011*

Artists with No Auction Sale Record in

Skate’s Top 5000

Artists with No Repeat Sale Record in

Skate’s Top 5000

Living Artists with No Auction Sale Record

in Skate’s Top 5000

Vincent van Gogh 635,416,127 Henri Matisse 809,719,353 Jasper Johns 198,553,750

Jasper Johns 198,553,750 Paul Cézanne 675,024,147 Damien Hirst 174,174,487

Piet Mondrian 193,716,295 Vincent van Gogh 635,416,127 Frank Stella 33,060,000

Canaletto 177,588,210 Mark Rothko 596,578,710 Brice Marden 21,603,000

Damien Hirst 174,174,487 Edgar Degas 473,854,149 Frank Auerbach 18,788,573

Yves Klein 172,767,231 Gustav Klimt 415,319,676 Cai Guo Qiang 16,830,722

Rembrandt Harmensz

van Rijn 158,700,933 Paul Gauguin 390,043,592 Bruce Nauman 16,111,000

Edvard Munch 156,866,282 Egon Schiele 288,983,445 Chuck Close 13,887,500

Juan Gris 154,358,291 Jeff Koons 280,881,985 Bridget Riley 10,195,514

Joseph Mallord William

Turner 151,931,032 Camille Pissarro 210,096,861 Marlene Dumas 9,672,127


*In Skate’s Top 5000 price range

Table 19 Most Valuable Living Artists*

Rank of

Living Artists Artist

Rank among All

Artists in Top 5000 Market Cap

**

, USD Age as of

30-Dec-11

1 Gerhard Richter 14 504,304,381 79

2 Jeff Koons 24 280,881,985 56

3 Jasper Johns 26 198,553,750 81

4 Damien Hirst 37 174,174,487 46

5 Zao Wou-Ki 66 101,085,800 90

6 Richard Prince 67 97,519,263 62

7 Zhang Xiaogang 80 78,827,011 53

8 Peter Doig 82 72,224,924 52

9 Zeng Fanzhi 86 70,674,819 47

10 Ed Ruscha 116 43,377,678 74


*Based on representation in Skate’s Top 5000

**Aggregate value of artworks by the artist in Skate’s Top 5000 by historical auction prices paid

This past July, the art world lost two highly

important artists—individuals who throughout their

lives achieved enormous professional and social

recognition and saw their works command price

records at auction. Both were among the 10 most

valuable artists on the market, although since the

news of their death, the art market has yet to show

a notable reaction. Lucian Freud has not seen any

subsequent sales record since and now ranks as the

30th

most valuable artist in Skate’s Top 5000. Cy

22

Twombly has had two signature works sell at auction

and appear in Skate’s Top 5000—Untitled and

Untitled (Lexington, Virginia). These works sold

above their estimates and added $14.3 million in

value to his record.

Table 20 Skate’s Top 5000 Living Artists Who Passed Away in 2011

Artist Date of Birth Date of Death Age Market Cap at

Death, USD

Market Cap 30-

Dec-11, USD

Lucian Freud 08-Dec-22 20-Jul-11 89 211,992,811 211,992,811

Cy Twombly 25-Apr-28 05-Jul-11 83 126,476,319 140,753,319


23

Skate’s Art Stocks Review

Global Art Industry: Affected by Economic Uncertainty in 2011,

Art Stocks Lose on Average 15% in Value

Skate’s provides ongoing coverage of the global art

industry on its website and blog, and Table 19

summarizes the share performance data for all listed

companies worldwide that derive most of their

economics from servicing the art industry or

managing art assets. 2011 was the worst year since

2008, with Skate’s Art Stock Index, the only benchmark for the industry, shedding 15% of its

value. Against this backdrop, the performances of

Artprice, Abbey and Noble look very impressive and

have been detailed in Skate’s reporting during the year (see archive of Skate’s Market Notes). Over the

longer term, however, global art industry shares

continue to outperform the S&P 500 as shown in the

chart below.

Table 21 Skate’s Art Stock Index (Global Art Industry Performance) in 2011

All Values are in USD

Name Listing/

Currency

December

2011

Performance

YTD 2011

Performance

Price as of

December

23 2011, $

Market Cap as of

December 23

2011, USD mln

52-wk

High, $

52-wk

Low, $

Sotheby’s NYSE/ USD -7.6% -35.5% 29.01 1959.60 55.67 25.00

Artprice Paris/ EUR 15.7% 328.2% 50.85 325.26 84.81 10.46

Artnet Frankfurt/ EUR 11.9% -25.9% 5.22 29.40 11.50 4.15

Collectors’ Universe

NASDAQ/USD 2.4% 3.5% 14.39 113.62 18.80 11.59

Mallett London/ GPB 5.1% 8.9% 1.14 15.69 1.24 1.00

Art Vivant Tokyo/JPY 0.6% -23.1% 2.29 35.43 3.21 2.28

Seoul Auctions Seoul/WON -9.6% -42.5% 2.36 39.92 4.19 2.25

Shinwa Art

Auction Tokyo/JPY 2.3% 4.9% 396.80 23.01 1 028.46 358.94

Stanley

Gibbons London/GBP -0.1% 1.0% 2.58 64.94 3.28 2.36

MCH Group Zurich/CHF 5.3% -17.8% 41.68 215.80 55.12 38.11

Abbey House Warsaw/PLN -3.9% 255.4% 4.82 48.94 7.40 1.31

Noble

Investments London/GBP -1.3% 35.4% 2.61 40.46 2.92 1.92

Fotoeffect Moscow/RUB -1.2% -7.9% 16 345.2 459.78 18 531.0 16 345.2

Skate’s Art Stocks Index

-3.2% -15.0% 174.7 3 371.85 241.8 157.4

Skate's

Investable Art

Stocks Index

-1.1% - 78.8 2 679.21 100 68.2


http://www.skatepress.com/index.php?cat=63

24

Global Art Industry Still Outperforms S&P 500 over Longer Term

Table 22 Skate’s Art Stock Index: Historical Performance

Metric 2005 2006 2007 2008 2009 2010 2011*

SASI Index value as of December 31 109.6 150.9 172.0 66.4 114.8 205.4 175.0

Year performance, in points - 41.3 21.1 -105.7 48.5 90.6 -30.4

Year performance, in % - 37.7% 14.0% -61.4% 73.0% 78.9% -14.8%

S&P 500 year performance, in % - 13.6% 3.5% -38.5% 23.5% 12.8% 0.6%

Number of stocks as of Dec 31 11 11 11 12 12 11 13

Year trading volume (USD, mln) - 17,676.8 27,781.6 20,602.2 6,122.0 13,206.2 13,490.7

Market cap as of 31-Dec, (USD, mln) 2,099.2 2,889.7 3,294.1 1,270.6 2,198.5 3,921.5 3,378.5


*Data as of December 27, 2011

0

50

100

150

200

250

300

350

400 Sotheby's Art stocks Index S&P 500

25

Calendar of Conferences and Other Events in which Skate's Will Participate in 2012

Skate's will participate in the following conferences and other events in 2012. Please visit

www.skatepress.com for updated information.

February Moscow The Russia Forum 2012

March New York The Armory Show

April Tempe Assets 2012 – the International Society of

Appraisers Annual Conference

May Havana Skate’s Insiders Club

September Vienna Art Industry Summit

December Miami Art Basel Miami

We would love to hear what you think of this analysis from Skate’s. Please email us at [email protected] and we will be happy to post your comments online if you so desire.

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