ART MARKET INVESTMENT EMERGING TRENDS SEMINARS
Early this month, Jeffrey Boloten, Director of ArtInsight, opened the organisation’s second art market seminar by highlighting the importance of innovations in art investment in a changing international economic climate. We were there and have pulled out some of the useful tips and market trends to pass on.
Boloten introduced the seminar, named Innovations in Art Investment – 2011: Trends Risks and Opportunities with a few comments on the themes to be addressed by the other speakers, pointing to current trends in the art market like “investment-driven buying” and its effects on the motivations behind holding art. He posed two crucial questions: “Is art an asset class?” and “Will art become an asset class?”
The panel consisted of four speakers:
- Anders Petterson, Managing Director of ArtTactic and panel moderator
- John Langan, a partner at Withers LLP
- Charlotte Cooper, Investor Relations and Head of Operations, The Fine Art Fund Group
- Melanie Cassoff, Director/Relationship Manager of Deutsche Bank Private Wealth Management
Art Radar Asia brings you below the highlights from each speaker’s presentation. Please note that while this talk does not focus solely on Asia, its global art market focus means that trends and themes discussed are relevant to the region.
Anders Petterson: Why art funds fail
Anders Petterson of ArtTactic, an organisation set up by Petterson in 2001 to conduct art market research, opened the talk by discussing academia’s new relationship to the market and art investment. The complexities of the art market and of its products means that there are “methodological issues,” just as there are “academic struggles with how we treat art as each work is different.”
He went on to discuss the evolution of art funds, using The Fine Art Fund Group as an example. This fund, whose Head of Operations will feature later in this article, is documented to be the first of its kind, starting as a club in 1910, and can be seen as an art world example of “capital led by expert.” Petterson followed up with examples of other art funds, outlining that the primary reason they fail was because “these two worlds do not speak the same language. Finance have the money but not the art expertise and the experts do not have the money.”
The area of art lending has seen an increase in the number of specialist lenders and art derivatives in operation, he stated, prompting questions about whether the art market is ready for this type of investment, and this increase is mirrored in the newly developing art exchange market. Petterson cites the very young Paris Exchange, launched a mere five weeks ago, as an example. The company divides art work into shares and trades it on a day-to-day basis: “Art share is traded through exchange.” Similar art exchange companies can now be found in China.
Charlotte Cooper: Criteria for art fund success
The Fine Art Fund Group was set up in 2001 by art collector and former Christie’s employee, Philip Hoffman. The organisation touts “key insider knowledge of the art market, deep expertise and a decision making structure,” and seeks to fill the gap between financial input and expert opinion. Operational processes are coordinated and supervised by global corporate KPMG.
In her talk, Cooper focussed on the criteria for art fund success:
- Expertise on both the art world and financial structures
- Recognising and providing opportunities for investment
- Efficient mobilisation of funds
- Centralised and focussed goals and teams
- Insider access to the art market
Melanie Cassoff: Art part of Deutsche Bank’s identity
Melanie Cassof, Director/Relationship Manager of Deutsche Bank Private Wealth Management, began her talk by explaining Deutsche Bank’s role in the art market.
Cassoff stressed the importance of art to Deutsche Bank, saying that it “represents part of Deutsche Bank’s identity.” The organisation has a corporate collection of 57,000 pieces, the largest of its kind in the world, and shows strong support for emerging artists. In 2010, Deutsche Bank sponsored the Frieze art fair in London and regularly hosts art exhibitions in partnership with the Guggenheim Foundation. In addition, the bank offers art advisory and lending services to investors in the art market.
The challenge that art funds face, Cassoff explained, is getting passionate collectors, who collect because of their attachment to the art, to see their purchases as both emotional and financial investments, at least for the time the work is held in the fund.
John Langan: Limited partnership works best
John Langan, who specialises in advising on UK and offshore investment management arrangements and investment funds, added that art funds work best when they combine a sound investment arrangement with the unique commercial front of an art fund.
Limited partnerships, said Langan, are the most common partnership arrangement used by successful art funds. The structure works by having one general partner who manages the partnership and takes liability. The other partners have limited liability and thus are considered passive investors. The process often takes eight to ten years, during which small artworks are bought and realised.
Audience questions: Western art before Asian
Charlotte Cooper of The Fine Art Fund Group explained the difficulty that the fund faces in marketing itself as a “financially viable, steady fund,” something that is becoming increasingly important in the current global financial situation. Presenting a fund as a “permanent fixture” is a challenge, she said, and to survive in today’s investment climate the organisation must position itself as a tool for investment as well as an advisory resource.
John Langan of Withers LLP added to this by explaining that the financial markets are very different to the art markets. Art funds are still few and far between and because of this they fail to stimulate competition, resulting in young and underdeveloped art markets.
In response to questions about growing Asian markets, particularly India as one audience member pointed out, Cooper explained that while The Fine Art Fund Group “keeps an eye” on these markets, investing in them to monitor growth, the bulk of their investment continues to be in Western art.
The term “asset class” arose again as another audience member questioned the panel on the limitations of this concept in relation to art. The fact that art investment remains a niche market, unlike the buying of stocks, places restrictions on funding and investment in the sector, as does the risk associated with this investment given the influence auction houses and specialists have over art work value.
So, while the finance world and the art world are building connections, it seems that the future of art as an “asset class” remains unclear.
More on ArtInsight’s Global Art Market Series: 2011
The 2011 Global Art Market Series, held at London Business School, is hosted by ArtInsight, a London-based firm which offers seminars, classes and courses on the art market. The three-part seminar series centres on understanding the important developments in today’s global art market, featuring presentations and panel discussions from leading figures.
Be sure to check back shortly after 15 March for our report on the last seminar in this series, Developments in the Emerging Art Markets: A Global Overview – Focus on Africa, Brazil & Russia.
- 3 art innovators share intriguing business models at first ArtInsight seminar – February 2011 –
- Can you sell big to first-time collectors? Indian Art Summit 2011 round-up – February 2011 – What are dealers saying about contemporary Indian art?
- Sotheby’s Ullens Collection art auction preview: Zhang Xiaogang top highlight at 3.2 million – February 2011 – prices and artworks named for this seminal Chinese art auction
- Most groundbreaking contemporary art from East? Three top art experts say no – December 2010 – West vs East: part two of this professional art market debate
- Groundbreaking art from East or West? Top art professionals debate at Saatchi – December 2010 – West vs East: part one of this expert art market debate