Art is never a rich person’s first purchase. ‘It comes second or third,’ says Neil Wenman, global creative director and partner at leading gallery Hauser + Wirth. ‘The people spending $50 million upwards on art already own a yacht [or two].’ They also own multiple houses, so whatever they’re buying to hang on their oversized, pristine white walls in Aspen, Palm Beach, London or Dubai must have value beyond future financial appreciation or even decoration. It has to say something about its owner, namely that they’re in tune with the times.

Recognisable art is always in demand, although what is recognisable changes with every generation. If you see an Antony Gormley or an Andy Warhol in someone’s home, you can pretty much assume the owner is north of 50. A painting by the red-hot British abstract artist Pam Evelyn? That suggests you’re nursing your first beard.

The term ‘blue chip’ has long been used to describe artists whose places are secured in history. Blue chip is what you see in top museums and foundations, and in the private wings of the world’s richest collectors. It is considered a ‘safe’ investment that will creep up in value over time. Blue-chip artists like Picasso, Matisse, Gerhard Richter, Warhol, Jeff Koons and Giacometti were once considered bulletproof. But that was before ‘red chip’ arrived.

Red-chip art – a term coined by the journalist Scott Reyburn – is the great disruptor. It’s essentially new art (the artists are often under 40 and previously unknown) that gets the kind of instant financial returns blue-chip investors can only dream of. Red-chip art is almost wet to the touch, having just been craned out of the studios of Columbia’s MFA programme or a small group show in Shoreditch. Social media plays a huge role in its ascent (and its possible descent).

Red-chip artists can see works triple in price in a matter of years thanks to the practice of ‘flipping’ at auction houses – that is, putting something up for sale mere months after you bought it from a dealer, for a quick profit. (Flipping used to happen only when an artist was considered ‘legacy’.) Red-chip artworks can sell for 20 times their estimate, as in the case of The Bathers (2015) by the African-American artist Amy Sherald, which sold for $4.3 million at Phillips in 2020. By 2022, the total turnover at auction from artists under 40 reached an all-time high of $200.9 million. This meant unprecedented multi-million-dollar prices for red-chip artists such as Flora Yukhnovich, Nicolas Party, Dana Schutz, Amoako Boafo and Lucy Bull. Artists as young as 28-year-old Canadian Anna Weyant, already ‘flip’ for $1.6 million.

The question on everyone’s lips is, can it last? Established galleries such as Gagosian, which used to deal only in legacy, are also participating, recently bringing on board the British artist Jadé Fadojutimi. This saw her prices soar from £20,000 to £402,200 in a space of a few years; her painting Acquainted Intruder fetched close to £1 million at Christie’s last year. For reference: a landscape by the late self-taught artist Matthew Wong can fetch more than $6 million at auction. That’s twice what you would pay for a landscape by the 19th-century German artist Caspar David Friedrich. Red-chip artist Dana Schutz’s Elevator sold at Christie’s for a record $6.5 million in 2020, beating an Andy Warhol (with only one bid) by $400,000.

Red chip fever can be explained in part by the mad prices reached by young(ish) artists such as Jeff Koons in the 1980s. Contemporary art makes old people feel young and young people feel trendy.

Nothing changes, says Joseph Koerner, who lectures on art history and architecture at Harvard University. ‘There is a long-standing assumption in the top end of the contemporary art market that A, what will change the course of history is happening now rather than in the past, that B, what is transformative now will have been overlooked by almost everyone due to its novelty (true from Manet and Picasso on), and therefore C, there will be premium on being first.’ This makes punters try to game the market by focusing on the new. ‘It’s sort of like a “fund” for start-ups, where 10 per cent might survive and the rest go down the tubes,’ he says.

The fact that owning a work by Flora Yukhnovich (the 33-year-old British darling of the art world who paints landscapes reminiscent of Fragonard) speaks as much about your market savvy as it does your good taste, forces dealers to set the bar higher and higher for new buyers in the market.

This means ever more ‘lists’, which are to art what bouncers are to Berghain. A list is a series of collectors well known to the gallery who are ‘allowed’ to purchase a sought-after work. Of course, if you are Bill Gates and not on the list, your name will be rapidly added – but in general they are about keeping the riff-raff at bay.

Lists exist solely so galleries can strategically place works, first with museums (which boosts an artist’s fortunes) then foundations, and, finally, important existing collectors. Such lists may also place restrictions on whether and when you can sell at auction, limiting the buyer’s flipping potential.

Punters are not difficult to spot, says gallerist Josh Lilley, who represents star red-chip artists such as Tom Anholt (whose work sold out at Frieze Seoul) and the American sculptor Kathleen Ryan, whose prices have risen from $5,000 to $400,000 in seven years. Lilley manages his artists’ careers closely and seldom loses one of them – unusual in today’s red chip frenzy, which sees galleries trying to lure away competitors’ talents.

A newbie collector who wants to buy a particular artist may have to undergo an inspection of their home on grounds of aesthetics and/or credentials. They may then be forced to buy several other works by less prized artists in order to show ‘good will’ before being allowed to spend money on the one they were actually interested in. And even then, they may have to commit to buying several works by the same name, not just one work. ‘What you want’, says Lilley, ‘is a sell-out show.’
When this happens, the poachers inevitably circle. ‘Some artists can be tempted by a larger gallery with more space and bigger budgets,’ says Lilley. This can work, he says, ‘for short-term gain’.

Artists also play the list game. The American artist Lauren Halsey, 36, for example, chose to publish her requirements online on Art Net: certain works could be sold only to people of colour or to public collections.

The rise of red-chip art coincided with the tech bubble. Now that interest and inflation are both sky high, and money is expensive to borrow, will it also burst? Overnight success can lead to what Caspar Jopling of White Cube calls ‘the shooting star effect’. ‘If an artist gets too hot too fast, they can see prices plummet to zero, as they did for the members of the “zombie formalism” group,’ he says. Made using paint-filled fire extinguishers, or with dirt from the studio floor, works by this group initially sold for as high as $400,000. ‘Now it’s zero,’ he says.

Artists are also wary of the ‘it’ effect. ‘Overnight success is very rarely seen as positive,’ says the sculptor Finbar Ward, who graduated from the Ruskin School of Art in 2013. ‘If you see an artist’s prices go too high, it disincentivises existing collectors from buying more, and leaves the artist nowhere to go. Relationships with galleries really matter because a career should be carefully choreographed over a long period of time.’

Art advisor Sibylle Rochat of Rochat Art Consultancy says newbie buyers often come to her armed with invoices of what they’ve bought from hot artists. They plan to sell, only to find their collection has not retained its original value. ‘We do damage control,’ she says.

Rochat advises against red-chip art. ‘That train has left the station, I fear,’ she says. ‘Art is getting more and more commodified, a process which auction houses are facilitating. Artists are speculating too, and can burn 1,000 bridges. It’s simply not sustainable.’ Her own clients know what they like and closely follow more established artists’ careers over decades. ‘They might fly to Tokyo to see him or her in a show; they may even support an artist to mount an exhibition,’ she says.

Art needs context. One of the reasons White Cube exhibits at Tefaf, the Maastricht-based blue-chip art, antiques and jewellery fair, is so that collectors can see old and new art in situ. ‘Art for us is about the place it commands in an historical sense,’ says Jopling. ‘It’s not just about how you hang work; it’s about finding the references between African masks and an old master from another century.’ By positioning their (all-white) gallery in among darkly painted stands full of antiquities, they appeal to the older collector who may find new art ‘scary’. Young collectors are still few and far between at Tefaf, despite museums flying in their hottest young guns.

According to Forbes, there are 2,755 billionaires who can comfortably drop $200 million on art right now. What sells art – to them – is the story (which is often more important than the artwork itself). The Knight Frank Luxury Investment Index says art was the top-performing ‘investment of passion’ in 2022. It is also a quick way to move up the social ladder. A single purchase at an auction house is enough to ensure you are on the right invitation lists. It’s also the fastest way for auction houses to make money: Sotheby’s reported in 2021 that the number of customers under 40 had increased by 187 per cent, and millennials are the fastest-growing constituency of collectors.

Contemporary art is about contemporary issues. ‘Today it’s all about female artists, artists of colour, artists of the LGBTQ community, politically minded artists and artists previously overlooked,’ says Wenman.

Enter the private art advisor, some of whom can earn millions of dollars working for just one family. Among this very select group of experts is Jane Suitor, the name behind the Freddie Mercury sale at Sotheby’s last month (which fetched £40 million, setting a record for any sale of its kind; Gen Z loves anything to do with celebrity). Suitor is responsible for bringing the collection to Sotheby’s, and although she won’t mention her very famous clients by name, they mention her (Victoria Beckham tagged her in an Instagram post). Suitor’s job is to help new and established collectors find their voice.

‘Finding a theme is important,’ she says. ‘The collector Valeria Napoleone only collects female artists, for example. Rather than look at who or what is cool right now, she puts it into a larger context of female art.’

Like many in the industry, Suitor feels the art market is about to enter ‘choppy waters’, which is all the more reason to focus on blue-chip investments. ‘I would suggest single-mindedness, whether that be nudes or painting from a certain date. You still can’t go wrong with a Picasso or two. If you have a view to selling, it’s always a better bet. If you’ve kept it hidden from view for years, when it does come to market, the narrative is strong.’

But although historically one held on to art until one of the three Ds – death, debt or divorce – loomed, now it’s about pushing up the price of the stock quickly. ‘The more opportunities art has to change hands, the more the profit,’ says Milena Lazazzera, a luxury writer and consultant. ‘The appeal of a living artist as opposed to an old master is that they have multiple opportunities to make more art, and, of course, product. Gen Z loves collaborations with fashion brands,’ she adds.

As for buying fashionable artists, there’s always a risk. Buying Jeff Koons in the 1990s will have stood you well; Julian Schnabel on the other hand, not so much – his reputation fluctuates madly. That’s why it’s important to buy what you actually like and hang it, which her clients do. Suitor hunts for new blood at degree shows at the Royal College of Art and newer spaces such as The Artist Room (run by Milo Astaire), snapping works up before the established galleries come hunting. Here, as elsewhere, ‘the story matters,’ she says.

Even experienced buyers are unsure how to proceed. ‘The pressure to discern the next thing is too great so I gravitate to artists whose work I’ve gotten to know by visiting their studios,’ says Sarah Elson, who has been collecting for 30 years. ‘The art I buy these days usually has a very personal connection to me. I’ve watched the London art scene grow from a handful of galleries that 12 people knew about to hundreds of them that are visited by everyone from curious tourists to art advisors with billionaires in tow,’ she says.

Art is rapidly copying the fashion model, which means being available wherever you are, at all times, whether that’s St Moritz, Southampton or the lobby of a five-star hotel. If you don’t make the list on one continent, you can always try another.

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