MARKET WATCH The art market will not be affected by the vicissitudes of the global economy Philip Hoffmann chief executive of The Fine Art Fund said to the Business Standard at the August 2008 Indian Art Summit. “The trading in art only looks to the economy of the super-rich,” he cites the example of Russian billionaire Abramovich spending close to $100 million just this year to pick up a few Freuds and Bacons (at record-breaking prices) to furnish his new house. “The total art market is worth around $30-50 billion, of which only about $15-20 billion is investible. And of this, only 20 individuals account for $2-4 billion worth of art.”
Nevertheless, Hoffman feels, that art investment is best left to the super rich. “Our minimum investor typically puts in around a quarter of a million dollars; and our typical investor is usually one who’s put in a million to five million dollars. I don’t advise anyone with modest wealth to invest in art. Unless he’s putting in less than 5 per cent of his money into art, he shouldn’t do it.”
Hoffman does annual trade of $120-130 million every year through the five funds he manages. Fine Art Fund I – the first of these that he announced in 2003 to invest in museum quality art – is the longest-running and most successful art fund globally, having announced last year an average annualised returns on assets sold of 44 per cent.
Hoffman claims that he never buys any art for himself though. “I trained as a chartered accountant. I was working with KPMG [in their audit practice] when I was recommended as finance director of Christie’s. I had no interest in the arts whatsoever.” He went on to become deputy managing director of the auction house’s European business and later, managing the old masters’ division. At 33, he was member of Christie’s International Managing Board, the youngest ever.
So what makes the art world go round? What is it that determines whether a painting will sell for $1,000 or for $1 million? “It’s simple economics – rarity and some amount of marketing, even if it happened hundreds of years ago. Take Canaletto. He was commissioned by the Queen to paint important British monuments. The queen herself had 20 or so of them and the rich men decided that if the queen had something they wanted it as well, and so on. It’s the same today, you hang a Gupta on the wall and it’s like hanging bank-notes on the wall or putting your bank statement on the table. I’m worth millions, it says.”
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