There’s still life in the art mar­ket

With con­tem­po­rary art prices plung­ing, things looks bleak. Or are they? Philip Hoff­man of the Fine Art Fund iden­ti­fies the pos­i­tives to busi­ness ed­i­tor Candice Krieger

The Jewish Chronicle - - Business -

SHRINK­ING FINE art sales and price drops of up to 30 per cent present a bleak pic­ture for the art world. But Philip Hoff­man, who founded the UK-based Fine Art Fund — one of the world’s largest fund man­age­ment firms — be­lieves there is rea­son to re­main up­beat.

“We have raised more money in the past four months than we did in the past year or so,” says Mr Hoff­man, 47, who founded the fund in 2004. For a min­i­mum of £125,000, it helps in­vestors buy and sell paint­ings, from old mas­ters to con­tem­po­rary art. Pur­chased works are stored in a Geneva ware­house.

Ac­cord­ing to Mr Hoff­man, up un­til last year, con­tem­po­rary art was the boom mar­ket, but old mas­ters are now prov­ing par­tic­u­larly pop­u­lar. “In the past month, world-record prices have been paid for old mas­ters (17th and 18th cen­tury pic­tures). Yet prices on works from the past 30 or 50 years have dropped off by 20 or 30 per cent.

“If you bought some­thing in June for £5 mil­lion, by Novem­ber, you might be looking at £3.5 mil­lion or £4 mil­lion. Whereas, if you bought some­thing for £1 mil­lion five years ago, you would prob­a­bly be up to around £2.5 mil­lion.

“The prices have gone up enor­mously in the past five years but have now tailed off.”

In fact, Mr Hoff­man says now is an op­por­tune time for in­vestors of more main­stream means to profit from a mar­ket that has tra­di­tion­ally been for su­per-rich Rus­sian oli­garchs and hedge-fund bil­lion­aires, now stung by the credit crunch. He says: “The next 12 months will bring some of the best op­por­tu­ni­ties in the art mar­ket ever. There will be dis­tressed sell­ers who need cash im­me­di­ately. If you’ve got cash, you’ll get some bar­gains, and if you sit on the work for three to five years, you will be able to dou­ble, triple or quadru­ple your money. A more sober mar­ket may at­tract new col­lec­tors or lure back those who were priced out in re­cent years.” Mr Hoff­man is hop­ing to raise be­tween $50 mil­lion and $100 mil­lion for an “op­por­tunis­tic” in­vest­ment fund to cash in on the bar­gains thrown up by the credit crunch.

“We are see­ing good qual­ity at at­trac­tive prices. We are still buy­ing, and from those who need the cash.”

He adds: “We are looking to raise more money, even though peo­ple are shy of in­vest­ing. I think that peo­ple are per­suaded by the ar­gu­ment that they can have op­por­tu­ni­ties to buy re­ally in­ter­est­ing art at bar­gain-base­ment prices in some ar­eas. And, in other ar­eas, you will just have to wait six months or so.”

In Novem­ber a self-por­trait by Fran­cis Ba­con, whose paint­ings have fetched some of the high­est prices in re­cent years — in­clud­ing one that sold for $86 mil­lion last May — failed to draw any bids at $25 mil­lion de­spite a $40 mil­lion pre-sale es­ti­mate. And news last week that auc­tion house Christie’s is to let up to a quar­ter of its 800 Lon­don-based staff go as it suf­fers in the down­turn will not do much to boost con­fi­dence.

So, where are the best places to in­vest? “I think there are some artists that have fur­ther to fall. I am not a big fan of Richard Prince. Like­wise, Damien Hirst and mul­ti­ples: that’s a tougher mar­ket. But re­ally im­por­tant early works by Philip Gus­ton will make record prices, be­cause peo­ple want rare things.

“The rare ones are the ones to in­vest in. You have to be looking to spend more than a mil­lion dol­lars for the re­ally rare pieces. The sweet spot is proba- bly in the $1 to $5 mil­lion bracket. There are plenty of peo­ple who can af­ford to spend that on art, even now.”

Around four months ago, a work by Hirst fetched more than £111 mil­lion, a record for a sale ded­i­cated to one artist at auc­tion. Mr Hoff­man him­self has made some prof­itable deals. In Oc­to­ber, he sold a work for £400,000, for which the fund paid £125,000. The fund also made a huge profit on a De­gas, which was bought for £1.9 mil­lion and sold for £2.4 mil­lion 15 months later. The fund’s av­er­age re­turn to date is 30 per cent.

Ac­cord­ing to Mr Hoff­man — who, by his own ad­mis­sion, is no art lover — for those ap­proach­ing the art mar­ket pri­mar­ily for prof­its, in­vest­ing in old mas­ters and con­tem­po­rary art is way up on hedge funds.

“Art is a rel­a­tively safe in­vest­ment. Peo­ple haven’t bor­rowed money to buy art. They may have bor­rowed money to buy prop­erty, shares and hedge funds. Most banks don’t like lend­ing against art be­cause they don’t re­ally fol­low or un­der­stand it. So there is very lit­tle money be­ing called back by the banks against their art port­fo­lios.

“There is a re­duc­tion in the amount of art avail­able on the mar­ket and gen­er­ally, it is the less-good art that’s com­ing on.”

But surely art is a lux­ury that peo­ple will cut back on as they tighten their belts? “If you com­pare this with 1991 — the last time we saw a sig­nif­i­cant drop in the art mar­ket — even then, im­por­tant sales were made. There are many con­tem­po­rary works where you will still see record prices; re­cently a Gus­ton piece in New York made £10 mil­lion — phe­nom­e­nal when there is a so-called credit crunch.”

He iden­ti­fies the Mid­dle East­ern mar­ket as in­cred­i­bly strong. “It is so small but there is so much money there that it is in­evitably hav­ing an af­fect on prices. What you could have bought for £10,000 two years ago you might have to pay £50,000 for this year.”

He adds: “The top end of the mar­ket is very rare and will get rarer, whereas with some­thing like wine for in­stance, they pro­duce ev­ery year. Rem­brandt, Rubens [Peter Paul], Pi­casso [Pablo] — you may get one chance to buy it in your life­time and if you don’t buy it now, you won’t get an­other chance. Peo­ple will ac­tu­ally put their hands in their pock­ets and spend money if it’s some­thing re­ally im­por­tant.”

Mr Hoff­man, who lives in Chelsea, West Lon­don, fell into the art world by chance. Hav­ing grad­u­ated from York Uni­ver­sity with an eco­nomics de­gree, he worked as a char­tered ac­coun­tant at KPMG In­ter­na­tional be­fore land­ing a job as fi­nance di­rec­tor at Christie’s.

Philip Hoff­man: Still buy­ing


Fran­cis Ba­con’s self-por­trait failed to find buy­ers at auc­tion last year

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