Flush collectors ready to spend again on rare art

NEW YORK (Reuters) - Fueled by international collectors and Wall Street investors reaping soaring profits, the beaten-down art market appears poised for a remarkable comeback after an 18-month stumble.

Rare buying opportunities to buy works by such modern masters as Jasper Johns and Mark Rothko will spur stiff competition and hefty spending by deep-pocketed collectors at the critical spring sales hosted by auction powerhouses Sotheby's and Christie's, art experts predict.

"You're going to see records set," said Baird Ryan, managing director of the private financial and consulting services firm Art Capital Group.

"I think we're going to be surprised by buyers' excitement," he said. "The international money exists, and there has been a secular recovery in the U.S., particularly in capital markets. Wall Street has had a really good year."

Top hedge fund managers -- who played no small role in the sustained art market boom that ended precipitously with the 2008 financial crisis -- recorded their best year ever in 2009. The annual ranking by AR: Absolute Return + Alpha showed the top 25 managers earned more than $25 billion.

"Our collectors are really rich again," said one auction house official.

Attracting intense interest are works that seldom come to market by artists Pablo Picasso and Andy Warhol, along with Rothko and Johns.

Earlier this year one of the most powerful hedge managers, SAC Capital Advisors founder Steve Cohen, bought a Johns' signature Flag painting from a New York dealer for about $110 million.

Christie's is offering a smaller version from the late writer Michael Crichton's collection, conservatively estimated at $10 million to $15 million, given the Flag series' rarity.

The global art market took a solid hit in 2009 as the financial crisis extended its grip to the rarefied arena, seen as a lagging indicator. Reported revenue was half the $9.3 billion posted in 2007, according to market monitor Artprice.

Auction houses responded by slashing operations and paring down sales by half as they labored to wrest consignments from sellers reluctant to go to market when prices were plummeting.

Much of the action, such as Cohen's "Flag" purchase, moved to the private market.

Suzanne Gyorgy, head of Citi Private Bank's Art Advisory Service, which works with collectors, said some were reluctant to be seen as flaunting wealth at a public auction during dire economic times.

Still, the bottom did not fall out of the market. November's leaner sales largely met or exceeded expectations, even if totals were a fraction of what they had been.

Assessing the damage to their own portfolios in the downturn, the super-rich -- those capable of spending millions on a single canvas -- largely passed on recent seasons.

Sellers were spooked by falling prices, but they are coming back, Gyorgy said. "We've had clients who have been sitting it out but are now ready to sell."

Then in February two determined bidders drove the price for a Giacometti sculpture to $104.3 million in London, setting a record for any work at auction.

With the rare, virtually unseen master works up for grabs, pent-up demand has collectors anxious to get in on the action.

Philip Hoffman, chief executive of the art-investment house Fine Art Group Fund, said he expected top lots such as the Picasso to "go through the roof."

"Collectors," Gyorgy said, "are also now more inclined to see art as a hedge against inflation.

(Editing by Ellen Wulfhorst and Todd Eastham)