TORONTO Nov 20 Collecting fine art is more
than just a hobby for savvy investors who see the art world as
a $50 billion vehicle for generating wealth, storing it and
passing on to their heirs.
Earlier this month, a Greek shipping family based in London
sold a silkscreen by Andy Warhol at a New York auction for
$43.8 million, [ID:nN11388766] having bought the piece for
$386,000 in 1986.
"They made over 120 times their money, which probably beats
other asset classes," said Philip Hoffman, founder the Fine Art
Hoffman's London-based funds manage about $100 million in
art assets, mostly "blue chip" art by painters like Picasso and
Degas, but also the work of emerging artists with promise.
The funds, which are aimed at high-net-worth families, buy
art with the aim of selling it at a profit of between 30
percent and 100 percent, over a period of one to four years.
Investing in art is not just for the ultra-wealthy, said
Jeremy Tabarrok, a wealth adviser at ScotiaMcLeod in Toronto.
"You don't have to be a millionaire to be a collector," he
said. "Hell knows, I'm not one, but I enjoy collecting."
He advises clients who buy art or have inherited it on
issues like taxes and estate planning.
In his experience, art generally "appreciates along the
lines of the stock market," even though massive short-term
price fluctuations are possible.
So why not just invest in stocks?
It's all about the art, he said. "The pieces in my house --
I enjoy them, I mean, I actually get physical enjoyment from
Hoffman takes a different slant.
"I don't collect art myself," he said. "I am not passionate
about art. I just regard it as a business. ... My view is that
being passionate about art hinders the decision about when to
buy and when to sell."
For example, he said his group bought a painting by British
artist Frank Auerbach. The asking price was $1.7 million.
"We negotiated the asking price down to $1.1 million and we
then sold it 15 months later for $2.6 million."
"We just took a dispassionate view and said this artist is
rare, important and on the up and that's why we made a lot of
money on it."
U.S. INVESTORS GETTING THE PICTURE
Hoffman said the idea of art as an investment was an easy
sell in Europe when he founded the art fund in 2001, but in
America, the initial reception was lukewarm.
"The American investors, who are very savvy, said we want
to see your track record. ... We want to see exact details of
what's been done."
On average, the annualized return of everything the group
has sold has paid out a 30 percent internal rate of return per
annum, said Hoffman. In the last few years it has sold about
$35 million of art for which it had paid $25 million.
"Now there have been many more investors coming in from the
States because they've seen how we operate," he said.
There are some U.S.-based art funds, but many of the U.S.
funds that have been proposed never got off the ground, said
Michael Plummer, former chief operating officer at Christie's
Financial Services, and co-founder of New York-based Artvest
Partners LLC, an art finance business.
He and his Artvest partner, Jeff Rabin, also a former
Christie's executive, recently started Artvest as a response to
illiquidity in the marketplace.
Using their networks of collectors, institutions and
wealthy individuals developed over many years working in the
art business, Artvest facilitates the buying and selling of
art, and gives advice on restructuring art businesses and
collections, preservation planning, and wealth transfer.
"If you really look over the course of history, art has
always been an important asset class and has been storer of
value through centuries," said Plummer. "We argue that art
should be part of any wealthy individual's portfolio."
Fine Art Fund Group's Hoffman said he recommends his
clients, who need to put up a minimum investment of $100,000,
put around 5 percent of their wealth into the group's funds.
(Editing by Frank McGurty)