Giv­ing art in­vest­ment more credit

Short of cash for that Pierneef? Bid­vest might have the prod­uct you need

Sunday Times - - Business Times - By ADELE SHEVEL

● Bid­vest Bank, in col­lab­o­ra­tion with As­pire Art Auc­tions, has launched SA’s first prod­uct aimed at pro­vid­ing credit for the pur­chase of art­works.

The ini­tia­tive mim­ics sim­i­lar moves in Eu­ro­pean mar­kets where art is a ma­jor as­set class. The prod­uct will be taken to galleries and is ex­pected to spur more in­ter­est in the mar­ket and pos­si­bly trig­ger fur­ther in­stru­ments of this kind.

In­vestors are in­creas­ingly look­ing at art as an al­ter­na­tive to tra­di­tional as­sets, though many aca­demic stud­ies ques­tion the value of the re­turns on of­fer and note that trans­ac­tion fees with galleries and auc­tion houses are of­ten higher than those for other as­set classes. This, the stud­ies say, can re­duce the at­trac­tion of art as a way of di­ver­si­fy­ing a port­fo­lio dom­i­nated by prop­erty, bonds or shares.

Mean­while, glob­ally, the art auc­tion mar­ket al­most dou­bled in sales vol­ume be­tween 2002 and 2013 be­cause of ris­ing wealth and very low in­ter­est rates, ac­cord­ing to a re­port from In­vestec.

The global art mar­ket is dom­i­nated by two auc­tion houses, Christie’s and Sotheby’s. In SA, Strauss & Co is the largest art auc­tion house in terms of rev­enue, fol­lowed by As­pire, which launched in March 2016.

Though the lo­cal art mar­ket is small com­pared with the world mar­ket, there’s been growth in the past few years, es­pe­cially with the plethora of new art fairs and galleries.

Lo­cal banks have been pay­ing a lot more at­ten­tion to the art world, though of­ten in a pe­riph­eral way in the form of spon­sor­ships. There is the FNB Joburg Art Fair, RMB Tur­bine Art Fair and In­vestec Cape Town Art Fair; and Absa and Stan­dard Bank have galleries which of­ten show­case top ex­hi­bi­tions.

James Sey, mar­ket­ing man­ager at As­pire, said there had been an in­creased in­ter­est in art. “It’s an un­con­ven­tional as­set class … Peo­ple who know will know which sig­na­tures will bring re­turns. It’s an in­ter­na­tion­ally es­tab­lished as­set class, which is tracked against other as­set classes.”

Sey said col­lect­ing art was not only for the top end of the mar­ket. At As­pire, he said, on­line auc­tions of­ten fea­tured edi­tions of prints and artists who did not have a big pres­ence at auc­tions and could be of­fered at lower prices — down to R1,000.

As­pire also han­dles art books on its on­line auc­tions. “These have a slightly dif­fer­ent col­lec­tor base, of­ten book deal­ers. It’s a par­tic­u­lar sales chan­nel that is grow­ing for us, but live auc­tions are our main fo­cus,” said Sey. These take place three or four times a year.

Sey es­ti­mated the art mar­ket was worth “some­where north of R1.5bn a year” in SA, though no re­li­able data was avail­able. The global art mar­ket is sit­ting at about $60bn a year, “de­pend­ing on your source”.

Re­pay­ment sched­ules for the newly launched Bid­vest prod­uct range from a three-month min­i­mum to 24 months. In­ter­est rates are de­ter­mined dur­ing the ap­pli­ca­tion process, for which the bank aims to have a turn­around time of 48 work­ing hours. Nor­mal credit checks are ap­plied.

Brian Joffe, the for­mer CEO of Bid­vest, and Adrian Gore, CEO of Dis­cov­ery Hold­ings, who both col­lect art, are share­hold­ers in As­pire. But nei­ther is in­volved in the daily run­ning of the busi­ness.

Art­price, a French on­line art price data­base, re­cently re­ported that turnover for global fine-art auc­tions reached $8.45bn in June, an in­crease of 18% over six months. The mar­ket grew in the West and in China, with a whop­ping 48% in­crease in turnover in the US to $3.3bn. Turnover in China rose to $2bn and in the UK it was up 17% to $1.9bn.

Art­price said nearly half of the to­tal global turnover was ac­counted for by the mod­ern art seg­ment, led by works by Pi­casso and Modigliani.

Ex­perts cau­tion that these eye-wa­ter­ing fig­ures are only re­ally pos­si­ble for works con­signed by mu­se­ums or large art in­sti­tu­tions, along with a small group of high net worth in­di­vid­u­als.

Deloitte’s “Art & Fi­nance Re­port 2017” said six of the seven ma­jor art in­dices re­ported pos­i­tive re­turns for the year to April last year, led by Im­pres­sion­ists (up 10.5%) and con­tem­po­rary (up 7.45%). Con­tem­po­rary art has de­liv­ered a com­pound an­nual growth rate of 4.09% and old masters 1.72%, ac­cord­ing to In­vestec.

In­ter­est in South African art is grow­ing, par­tic­u­larly in the work of prom­i­nent artists as Wil­liam Ken­tridge, Alexis Preller and Ger­ard Sekoto. UK auc­tion house Bon­hams now has a ded­i­cated South African depart­ment.

In the end, it comes down to risk and re­ward.

As the “Art & Fi­nance Re­port 2017” said, there are some cor­re­la­tions be­tween art cat­e­gories and tra­di­tional as­set classes.

“For ex­am­ple, Im­pres­sion­ist art and old masters are highly cor­re­lated with safe­haven as­sets like bonds or real es­tate, while move­ments like con­tem­po­rary or Chi­nese art tend to be cor­re­lated with riskier as­sets like eq­ui­ties and com­modi­ties,” the In­vestec re­port said.

Pic­ture: Moeletsi Mabe

Artist Nel­son Makamo has ex­hib­ited in group and solo ex­hi­bi­tions in SA, Europe, the US and the UK. Ac­cord­ing to Strauss & Co, some of his work has fetched close to R160,000 on auc­tion.

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