Sobering news about the leading to the the lesser.
Archive for the ‘fine art funds’ Category
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March 28, 2009Perfect NY Armory Week Cocktail Party Topic
March 7, 2009It’s Saturday and I’m sure everyone has played out the usual art fair talk-tracks: “Hiiiiiiii, how are you?” “So, how are sales?” “Have you been affected, everything okay?” “Is it true you can roll a bowling ball down the aisles of your fair?” – here is something much more interesting to think/talk about:
An article I read this week gave me flashbacks to the 1980s. Remember the speculative run in the art market and the subsequent bust in the 1990s due to the downturn in the Japanese economy? Many would recall the apogee of these times was when one weekend Ryoei Saito bought Vincent van Gogh’s Portrait du Dr. Gachet for $82.5 million from Christie’s NY and Auguste Renoir’s Au Moulin de la Galette for $78.1 million from Sotheby’s NY and then he and his paper company went bankrupt and he was charged with criminal activities.
The van Gogh was seized by Japan’s Fuji Bank (even though Saito asked to be cremated with it) and resold for a fraction of the price. In the end, Japan’s banks had confiscated over $200 million dollars of art from Japanese businessmen putting it all into bank vaults and then going under themselves. Some Eurocentrics describe this time as the devouring of Western culture by Japanese speculators. In these days, I would describe it as familiar.
Vincent van Gogh’s Portrait du Dr. Gachet and Auguste Renoir’s Au Moulin de la Galette
So with that background in mind, I present the ArtDaily headline of the week: Chinese Bidder at Christie’s YSL Auction Refuses to Pay for Controversial Works of Art. With quote of the week from this bidder who committed over $40 million dollars to 2 sculptures in the auction: “I must stress I do not have the money to pay for this”.
Um, really Mr. Cai Mingchao? Really?! So I thought, here we go again, but now with China.
NO, it’s so much more interesting – issues of cultural rights and heritage, patrimony and national sentiment – you can read here and here.
And a quote I would like to end on from Chinese Government Rep. Zhao Qizheng regarding the situation: “[Cao's bid] was a lesson to the rest of the world, including the French”.
Now go party and discuss…
The International Art Markets
September 25, 2008The publishers of The International Art Markets: The essential guide for collectors and investors kindly sent me a copy to read and review. It has obviously taken me forever to do this because this book covers the markets in Sub-Saharan Africa, Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, China, Czech Republic, Denmark, Iceland, Finland, France Germany, Greece, India, Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Middles East, North Africa, The Netherlands, New Zealand, Norway, The Philippines, Poland, Portugal, Russia, Singapore, South Africa, South Korea, North Korea (just kidding), Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, USA and Venezuela. I guess since I already spent 70k at Sotheby’s Institute learning about all of this, I was the right person to ask
Edited by James Goodwin, with contributions by some of my old grad school professors and other associates, I have to admit that I was a little nervous to read and then publicly review. Especially since the chapters on the markets in Sub-Sahara Africa and Portugal are each twice as long as the one on the American market. And because the book cost $100 and there are advertisements for a diamond company on the first page … but I was pleasantly surprised, who knew the market in the Czech Republic was so interesting?
Each week I will write on a country above, starting tomorrow with Sub-Sahara Africa…
Specullector, meet Photopreneur
August 15, 2008Thank you Dean Shanson of Photopreneur for the great reporting!
Content below, but I suggest subscribing to their feed – all the posts are info packed:
Edgy Photos Sell In the Art World
Posted 08/14/08 by Dean
Photography: voteprime
For most workaday photographers, the world of auctions, collectors and the art market can seem very far away. But that doesn’t stop just about everyone who picks up a camera from dreaming about it. While few photographers seriously expect their wedding formals or baby portraits to change hands for six-figure sums, many would certainly like to believe that one day, just maybe, they’ll see their landscapes or their street photography hanging in a gallery, reviewed by critics, adored by curators and fought over by collectors.
Not only it could happen for photographers with the right talent but according to art expert, Lauren Gentile, photographers might even be in an enviable position in comparison to some other artists. Because many copies of a photo can be produced from a single shot, the prices for each print are lower and therefore easier for art-lovers to add to their collections.
“Photography is becoming more collectible because it is accessible in terms of price,” Lauren told us. “You can get a nice photograph for a couple thousand – this is so, and differs from collecting painting because photography is editioned like traditional prints.”
Blue-Chip Photographs
For major buyers, though, those low prices aren’t necessarily an attraction. Lauren, who is an Assistant Director and Director of Sales at the Irvine Contemporary gallery in Washington D.C., reports that her collectors are now buying “blue-chip” photographs (works by top-sellers like Andreas Gursky whose 99 Cent II Diptych sold for $3.34 million in 2007) or artworks from “the emerging sector,” and often both. From new artists, collectors are interested in photographs that she describes as either edgy or nostalgic. Irvine Contemporary’s list of artists includes Marla Rutherford, for example, a fashion, editorial and advertising photographer whose photographs includes fetish images that have been exhibited at SCOPE Miami Art Basel.
If all that talk of “blue-chips” and “emerging sectors” sounds very financial however, perhaps that’s not too surprising, despite the artistic context. Lauren’s own background includes researching art funds – investment portfolios made up of artworks that are intended to rise in value like stocks – and she describes herself as a “specullector,” a fine art collector who looks not only at a work’s artistic value but also its market price and the potential of that price to grow.
Clearly, predicting those changes is not easy to do — which is why Lauren says that she can only speculate. The prices of works created by artists completing their Masters in Fine Arts (MFA), such as those included in Irvine Contemporary’s “Introductions4″ on show through August, can only rise, she notes, but for established photographers, some research can offer clues to the chances an artist’s work will become more valuable.
“If the artist is mid-career I look at what exhibitions they have scheduled for the future, who they will be showing with, is their work being contextualized with the works of higher valued artists? Whether or not critics are reviewing their works in Aperture, ArtForum, etc. and what curators have included them in shows and where? Also if museums have started to collect their work, and what ‘tastemakers’ do too.”
The increasing numbers of buyers in China and Russia is also raising the prices of work by established artists, Lauren notes, but as the art heads east, the money flowing west leaves European and American collectors more cash to spend on new, lower-priced emerging artists.
Chinese Buyers Help Emerging Photographers
So what can a photographer dreaming of breaking into the art world do to raise their profile and take their share of the sales?
Building a website is one necessity, says Lauren. Finding gallery representation is another. While one of those is obviously much easier than the other, working with a gallery can provide all sorts of benefits that allow the artist the freedom and time to work. The gallery will also provide guidance, career management and help to develop price structures.
But there is a price to be paid for this success and it goes beyond the share of the sales price taken by the gallery. The photograph can disappear from view.
“Works of art that are bought purely for investment reasons are put in a storage facility,” Lauren explained. “[F]or tax purposes these works of art cannot be displayed because then the collector (or fund manager) is deriving physical benefits from being able to view the work — the IRS has a big problem with that.”
Artists still waiting for their big gallery break then can console themselves that while their photographs have yet to make the big time, people can at least see and enjoy them.
Pigeonholing the Player
January 30, 2008On January 28th, Artprice.com, a pretty reliable, yet clunky price database primarily used for European artists, has devised a way to measure the art “Players’ confidence” with their new Art Market Confidence Index (AMCI), live.
What’s become one of my favorite things is when a group or individual attempts to use an assessment created for financial services to gauge the art market. There are characteristics intrinsic to the art market which make this impossible (quickly: information asymmetry, absence of mark-to-market prices, no price standardization or transparency, costs, conflicts of interest, the fact that the art market is the largest unregulated money market, etc…).
So back to AMCI. All you have to do is go to their website and answer these 4 simple questions:
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According to you, would now be the appropriate time to buy art works? |
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YES |
NO |
INDIFFERENT |
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Is your financial situation better or worse than it was 3 months ago? |
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BETTER |
WORSE |
STABLE |
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In the next 3 months, will you expect the economic climate to be: |
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FAVORABLE |
UNFAVORABLE |
IDENTICAL |
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What do you expect art prices will be in the next 3 months: |
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RISE |
FALL |
STABLE |
You are then taken to this screen (link takes you into my account so you don’t have to share your info with ArtPrice or use LAUREN@IRVINECONTEMPORARY.COM and password – LAUREN) to see the live graph.
Looks like the Consumer Confidence Index doesn’t it? Generalized, and vague – self-fulling rather than foretelling. This indicator is not revealing. I just hope it will not influence behavior.
(confidence has decreased from -5.8 to -8.6 in the time it took me to write this)
Blame it on the Hedge Funders
August 7, 2007Those of you who read the article, Liquid Skies, written by Charlie Finch published this week on Artnet News may feel a little anxious about your recent and future purchases.
Readers – Stay calm. The world isn’t going to end, not even the contemporary art world, but Charlie Finch is right – the art market has been over-inflated by players who aren’t realizing the distortions they are creating by their high volume manipulations, I mean transactions… but, those dealing in the alpha market (think Warhol and Hirst) are the most vulnerable.
In the beginning of the piece, Finch compares the characteristics of hedge funds to the art market and investing in fine art – high fees, information opacity, low regulation, long hold periods, and difficult/slow turnover – basically high risk, and possible high reward.
In response to Finch’s comments regarding German and British banks – Yes, the subprime market (the subprime market serves borrowers who have poor or no credit histories or limited incomes and can’t meet the credit standards to get loans in the prime market) has destabilized their banks – but according to a British statistician friend of mine who I sent a panicked email to – they’ll survive.
Everyone knows that an increase in leveraging, in any sector, equals a less stable marketplace. So one could argue that, looking back, this is a good example of what happens when risk advisors don’t estimate all the variables involved – a small increase in interest rates was enough to seriously refute their assumptions.
Although I agree with Finch, Collectors – don’t panic Please don’t look with disdain at the contemporary art on your walls, just start learning to appreciate the psychic benefits and enjoyment of owning it… instead of fantasizing about its resale value.
Taub’s Lawyers Leave Him
July 11, 2007After struggling to find anything interesting in ArtNews – for the past 3 years – a little blurb caught my eye. Bruce Taub, former founder of Fernwood Art Investments and purveyor of the most ridiculous art market quote “…Even my secretary could someday own [shares of art] in her 401k…” has had both of the law firms representing him, withdraw.*
On April 5, 2007 it was reported in the Baer Faxt that Bruce Taub was being sued first by Roy Disney’s company Shamrock Estates for $1 million and then again by Whitmore Brey LLc, Hinchliffe Living Trust, Louise + Tom Jones Subscription LLC, Andrea van de Kamp (former chairman of Sotheby’s), William Pearlstein (art lawyer), John Scharffenberger (gourmet food entrepreneur) and Ashton Hawkins (former counsel at the Met) for $1.63 million.
And now, in on a backpage of this month’s ArtNews, Bruce Taub who is being sued for embezzling not $1.63 million but $8 million from his fine art fund “to promote himself and his wife in the art world, and to pay their personal expenses” without launching a single investment fund.
Some background on Fernwood and fine art funds: The opportunity to exploit an inefficient market was the prime factor for developing Fernwood. Fernwood, which began in Boston in 2003 with aspirations to begin purchasing works at the end of 2005, like other fine art funds folded after failing to meet investor expectations, being unable to raise the $100–$150 million suggested capital for its development, and suffering from the effects of conflict of interest among its advisors.
Michael Plummer of Fernwood and formerly of Sotheby’s claimed. “We created an innovative structure that would have worked,” but recalls that “we were concerned whether [founder Bruce] Taub had the financial stability and the wherewithal to manage the funds during their life” (Haden-Guest 2006).
Todd Millay, past executive vice-president of strategy and product development at Fernwood, claimed that he and Taub falsely predicted the ease with which they would create a large-scale fund and find financial support: “Unlike other inefficient, large sectors of the economy, there is no investment boutique focusing on capturing art’s economic opportunities. Even specialty chemicals, medical devices and other kinds of arcane sectors have special private equity firms systematically looking for opportunities. So the first thing that Bruce and I thought was that Fernwood had a much bigger opportunity than just creating an art fund, which would be a fairly mundane and straightforward to do” (Groysberg, Podolny, & Keller 2006, p. 5).
Taub, who had a proven 25-year track record in the financial services and a bevy of seasoned international art advisors, set out to form a fully structured entity. He pointed to fine art’s low correlation to traditional assets and what Fernwood associates argued was “the wealth of comprehensive data never before available.” NB: This statement is disputed by many since art world holdings are estimated at approximately $30 billion and only 30– 50% of the works sold are done so transparently at auction (ABN AMRO 2005, p. 4).
Fernwood was, arguably, using the most favorable business model––the private equity model––and had sound financial thinking at its helm, but was never able to achieve funding. At first I blamed the collapse on the fact that Taub was above all an art collector. He and his wife came up with the vision of Fernwood while on vacation in Canyon Ranch, not the financial milieu that potential investors expect, and at the heart of Taub’s effort to marry art and finance he expanded too quickly and his group lost focus and faith.
But it turns out, I was wrong … you be the judge
* the law firms were Jager Smith and Pachulski Stang Ziehl Young Jones & Weintraub (and all background information on Fernwood was borrowed from my MAAB thesis: The Rationale of Art Funds: Success, Failure and the Future) -LG
