Auctioneer Jussi Pylkkanen takes bids on the Picasso masterpiece ‘Les Femmes d’Alger (Version O)’ at Christie’s in New York City on May 11. (TIMOTHY A. CLARY/AFP/Getty Images)

The post As China’s Appetite For Art Grows, A Private Bank Helps Collectors Feed Their Passion first appeared on Indian Art News.

Barclays PLC’s private bankers, meanwhile, are developing their own knowledge of art in order to hold forth with sophisticated art collectors among their clients. Heather Maizels, director of Barclays’s private bank in London, says the effort reflects a “very evident” increase in clients’ interest in art.
The heightened appreciation for art as an investment is driven largely by rising prices at auctions, particularly for contemporary art. The Mei Moses All Art Index, which tracks repeat auction sales, rose 14.52% last year, compared with a 4.91% total return for the Standard & Poor’s 500-stock index. The art index has rebounded sharply from an early 1990s decline that saw it drop about 20% over four years.
Art-advisory departments at several private banks and brokerage firms help clients learn about art, buy it, sell it and loan it to museums. They handle complexities such as insurance, shipping, taxes, intellectual-property disputes and estate-planning issues. Some even structure loans that let clients extract cash from their treasures without giving them up. At Citigroup, net revenue from that lending business has grown about 20% a year since 2002, reflecting increases in the number and size of the loans.
While these specialists serve the ultrarich, art isn’t the exclusive province of the upper crust. Karl Schweizer, head of UBS’s art-banking group, estimates that 20% to 25% of art sales range from $10,000 to $100,000, and plenty of fine art moves at prices of less than $10,000.
As a result, financial advisers to even modestly well-heeled clients increasingly need to have a working knowledge of the art market. A few works on a client’s wall might represent a meaningful percentage of their net worth. Art might also reduce risk in a client’s portfolio, as research shows it has a low correlation with stocks and bonds.
Michael Moses, who developed the Mei Moses index with Jianping Mei, a fellow professor at New York University’s Leonard Stern School of Business, says the “second beauty of art” is its low correlation to many financial assets. That means investing in art can reduce fluctuations in a client’s portfolio.
To be sure, art does have significant downsides as an investment. Its value can drop sharply if the artist, style or historic period falls out of fashion. It doesn’t provide income like a bond does. There are costs of owning art, such as insurance and appraisals. Selling it can take months and bring added costs like shipping and auction commissions.
That puts even greater importance on not overpaying for artwork. Mr. Schweizer of UBS says many factors play into valuations, including the artist’s importance, prices paid for the artist’s work in the past and the significance of the piece in the context of the artist’s body of work.
For advisers who are more comfortable talking mutual funds than Monet, the idea of advising clients on their art collections might seem intimidating. But a lack of a graduate degree in art history isn’t stopping many of them. Peter Rohr, a Merrill Lynch & Co. private-wealth adviser in Philadelphia, has built a working knowledge by visiting museums and galleries, reading art trade publications and attending auctions.

The post WEALTH MANAGERS are getting bullish on art. first appeared on Indian Art News.

MUMBAI: Investors may not be willing to touch equities with a barge pole, but they still appear to be open to art as an alternative asset class.

Contrary to popular belief, the ongoing bearish phase in the stock market has not impacted the sentiment for art. Thanks to corrected prices, prospective art collectors and investors are queuing up to buy quality works of art at “realistic” prices, say art advisors.

The ET Art index has only tripped 8% over the past six months, in sharp contrast to equities, which have fallen nearly 40% from their peaks at the start of this year. According to art advisors, post the deep correction in contemporary art segment in mid-2007, investors (predominantly ultra-high net worth individuals — UHNIs) are thronging auctions and galleries to buy or invest in quality works of both masters and amateur artists.

Record price-tags for the paintings of FN Souza, Tyeb Mehta and Subodh Gupta — at Christie’s and Sotheby’s — are testimonies to the fact that Indian art has fast gained a foothold in the international art market.

“For sure, even in these times of bad stock markets, art is still holding on as a good investment option. People are still buying quality art (work of masters) even though prices are trending up,” said Osian Art Advisory manager Lynn Sivanand.

Echoing Ms Sivanand, Ajay Seth of Copal Art said: “Even amateur artists with good probability of an upside in prices are getting good quotes in the art market.”

Art emerged as an exotic asset class in the four-year bull run in the equities market. Viewing it as an opportunity to corner more high net worth individuals, several equity broking houses began advising clients on investments in art.

Dawnay Day AV, HSBC, Edelweiss Capital, DSP Merrill Lynch, Kotak, Citibank, ABN Amro and ASK Wealth Advisors are some of the financial majors vying for the top spot in this segment.

“If you look on client-to-client basis, there is a small shift of investments from art to equities. Currently, investors are moving surplus funds to equities market. But then, that is not causing a crisis (like a sell-off) as there is great interest from genuine art aficionados to collect quality works at corrected prices,” said Dawnay Day AV executive director Surabhi Gupta.

“Moreover, equities market do not directly impact art market as the profile of players here are different. The art market is not going through a slowdown,” said Edelweiss Capital alternative investment head Anurag Mehrotra.

However, none of the brokerages (or galleries) have any plans to raise art funds in the near term. According to investment advisors, the Sebi diktat, restraining unregistered entities from pooling in money to float art funds, is coming in the way of these entities to raise fresh funds. As per Sebi, an art fund is a ‘collective investment scheme’ — wherein money is collected from public — and therefore, it is mandatory for them to have a certificate of registration as a ‘collective investment management company.’

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