Leslie Rankow Fine Arts

INTERNATIONAL ART ADVISORY SERVICE

Tag: alternative investment

A comprehensive report on the current art market from the Art Lending Services division at U.S. Trust

U.S. TRUST, AS DO MANY OF THE MOST HIGHLY REGARDED BANKING AND FINANCIAL ADVISORY INSTITUTIONS, OFFERS EXTENSIVE ART SERVICES. AS ART IS NOW CONSIDERED TO BE AN ALTERNATIVE INVESTMENT, AND NOT SIMPLY AN AESTHETIC PLEASURE, BANKING HAS ENTERED VERY FORCEFULLY IN THE COMPETITION TO PROVIDE ART LENDING SERVICES TO HELP BOTH COLLECTORS AND INSTITUTIONS HELP NAVIGATE THE COMPLEX ART WORLD.

RECENTLY U.S. TRUST, THE PRIVATE BANKING ARM OF BANK OF AMERICA,  PUBLISHED AN EXTREMELY COMPREHENSIVE ANALYSIS ON THE STATE OF THE CURRENT ART MARKET. IN A TIME OF TURMOIL AND CHANGE, GENERAL REEVALUATION AND A GLOBAL SHIFT IN THE ART MARKET, IT IS PARTICULARLY RELEVANT AND THE LRFA BLOG IS PLEASED TO SHARE IT WITH YOU. WE ARE DELIGHTED, AS WELL, TO REPORT THAT DANA PRUSSIAN, VICE PRESIDENT AT U.S. TRUST ART LENDING SERVICES, WILL BE CONTRIBUTING TO THE LRFA BLOG IN THE MONTHS AHEAD.

PART ONE

“We feel that you should not buy art purely as an investment. Buy it for love, desire, legacy, culture, pleasure, addiction,

status, and community.”

Art Services Market Update

At Bank of America Private Bank, we maintain a sharp focus on the art market and on the collectors, dealers, auctions specialists and institutions that make it function. We work closely with many of you across four pillars: art lending, art planning, consignment services and institutional arts endowment management. This update features our observations on the current state of the art market from a business perspective.

The Market

  • Current low interest rates, solid equity markets and more stratified wealth creation worldwide continues to drive capital toward art. The maturation and globalization of the art market has expanded the collector base and transformed the art market from a niche lifestyle into a $60 billion global industry.1 Still, overall art market growth in terms of total art sales has stalled since 2012, even as the S&P 500has currently more than doubled since that time.
  • If the Federal Reserve (Fed) continues its dovish policy, we expect collectors’ continued allocation of capital to art. When interest rates fall, the opportunity cost of holding non-interest-bearing assets like art goes down. The art market is driven by sentiment, so the greatest risk we see is a geopolitical event that impedes the global flow of capital and credit prompting collectors to pause.

• We anticipate that financial returns for contemporary art will be lower in the next decade than some may expect. The market has absorbed a lot of art since the turn of the century. An exceedingly large percentage of those works may be worth close to zero in a generation or so. And because we’re in a more mature and efficient art market, there may be fewer upside surprises than in decades past. We feel that you should not buy art purely as an investment. Buy it for your passion, enjoyment, legacy, culture, status or community.

The Auctions

• During the New York Spring Auctions, the market absorbed over $2 billion of art at Christie’s, Sotheby’s and Phillips, handily above the $1.6 billion pre-sale estimate. It was the first auction season defined by large estates of postwar
and contemporary art. Eye-catching results such as the $91 million Koons “Rabbit”, the $110 million Monet “Haystack” and the rapidly growing market for KAWS belie a more modest 5.1% annualized return2 achieved for repeat sales during the season. Given the recent performance of London auctions and the lack of clarity around a Brexit deal, New York will continue to be the premiere sale site for high-end postwar and contemporary art for the foreseeable future. Fresh-to- market works, typical of the artist’s oeuvre, in good condition, with strong provenance, continue to perform strongest at auction. Works by female and black artists also continue their rise.

• You likely saw that in June, Sotheby’s accepted a $3.7 billion buyout offer from French media entrepreneur Patrick Drahi. Interestingly, Bonhams was also bought out earlier this year. Going private will allow Sotheby’s more flexibility to compete for top lots, which will benefit major collectors, and will provide time and space to evolve its business model, which, like Christie’s, is challenged. Competition for top pictures has become a race-to-the-bottom: China isn’t the growth engine everyone hoped it would be, and online sales have yet to deliver meaningful scale or margin expansion. With business margins at around 10% for the industry, auction houses are officially on the hunt for new revenue streams.

• Look for the auction houses to continue to expand into art advisory, financial services, brand licensing and even investment research as they look beyond their supply-constrained auction business. As a collector, you may see better terms when consigning top works at auction, but expect higher commissions for lower- value works. Buyer premiums will continue to expand at all levels. Finally, get ready for more convenience. Virtual reality will change how you view upcoming sales, and artificial intelligence will soon be sending you an endless array of Netflix-style lot recommendations across all categories based on what you’ve perused across the internet.

Art Wealth Management with One Art Nation co-founder Julia Wehkamp

One Art Nation

ALL OF THE MAJOR BANKING INSTITUTIONS NOW OFFER AN EXTENSIVE RANGE OF ART SERVICES FOR INDIVIDUALS AND FAMILIES AND INSTITUTIONS. AN INNOVATIVE IDEA WHEN CITICORP INITIATED ITS PROGRAM IN 1979, NOW BANKS HELP CLIENTS BUILD, FINANCE AND PROTECT THEIR COLLECTIONS. CITI PIONEERED THE CONCEPT OF ART AS COLLATERAL AND NOW U.S. TRUST, FOR ONE, OFFERS A WIDE RANGE OF CAPABILITIES.  FOR INDIVIDUALS, THEY HELP COLLECTORS UNLOCK CAPITAL BY LENDING AGAINST COLLECTIONS, DESIGN ESTATE PLAN OPTIONS TO ADDRESS TAX AND OTHER IMPLICATIONS OF OWNING AN ART COLLECTION, AND HELP COLLECTORS PREPARE FOR THE SALE OF ARTWORKS VIA CONSIGNMENT SERVICES.

MORGAN STANLEY’S BLUE RIDER GROUP BRINGS SERIOUS EXPERTISE TO BUYING ART AS WELL AS FINANCING IT, ADVISING ON A PURCHASE AND PROVIDING TAX EFFICIENT PLANNING. INDEPENDENT FIRMS, SUCH AS ARTEMUS, OFFER INNOVATIVE ART FINANCIAL AND LEASING AND OTHER FIRMS, SUCH AS THE WINSTON ART GROUP, OFFER APPRAISAL SERVICES AND LIAISONS WITH MAJOR BANKS FOR FINANCING USING ART AS COLLATERAL.

IT IS A WORLD WHICH IS EXTREMELY IMPORTANT FOR THE ART PROFESSIONAL TO UNDERSTAND AS SO MANY COLLECTORS NOW LEVERAGE THEIR ART COLLECTIONS IN THE SAME WAY THEY DO THEIR OTHER ASSETS.

Art Wealth Management Program
One Art Nation

ONE ART NATION OFFERS AN EXTREMELY COMPREHENSIVE COURSE THAT COVERS THE FOLLOWING.

  • Understanding the Art Market
  • Understanding Pricing and Appraisals in Art
  • Legal Aspects of Art Transactions and Risk Factors in Art
  • Art Investment: Passion Asset vs. Equities and Fixed Income
  • Art Finance Solutions in Wealth Management and Estate Planning

TODAY, THE LRFA BLOG IS DELIGHTED TO WELCOME BACK THE CO-FOUNDER OF ONE ART NATION, JULIA WEHKAMP, TO PROVIDE DETAILS!

Julia Wehkamp
Co-Founder
One Art Nation


JULIA, THANK YOU FOR YOUR CONTRIBUTION.

WHAT DID YOU THINK WAS LACKING IN ART EDUCATION AT THE TIME THAT ONE ART NATION WAS LAUNCHED?

The market was lacking an unbiased source of accessible education, so we created one by working with experts and professionals from various areas across the globe. Although we include cultural aspects of the art world, we focus on the practicalities of collecting, thereby increasing confidence in purchasing and overall collection management decisions of art lovers. Since content is offered online, collectors cannot only access the talks and courses for free, but they are able to watch at their convenience. Both live and archived content include interactive components, allowing participants to communicate with the experts, asking questions and sharing experiences in an anonymous setting. This is key for a lot of collectors, particularly those new to buying art. An unintimidating source of information was sought across the board.

Aside from online talks for collectors, most recently, we have received multiple requests from members to offer art market education for professionals. These are focused online curricula with an enrollment fee, such as Art Wealth Management and Art Advisory 101 and 201.  

ONE OF THE MOST BENEFICIAL PROFESSIONAL PROGRAMS YOU PROVIDE IS AN ONLINE ART WEALTH MANAGEMENT CURRICULUM. WHAT DOES THIS INCLUDE?

The Program is an introductory course on the art market from an investment perspective.  You see, the art market has grown substantially. Sales in the global art market reached $63.7 billion in 2017, up 12% from the previous year, according to a 2018 study from Art Basel and UBS. The U.S. made up the largest share, accounting for 42% of the sales by value. Nonetheless, it’s a market that is opaque for most financial advisers. A 2017 art and finance report from Deloitte found that 88% of wealth managers felt their firms should offer art investing services, but most do not have the in-house expertise.

Therefore, we created the Art Wealth Management Program, which consists of a series of informative and interactive online courses that have been created to give wealth managers, private bankers, family offices and other financial advisors a true understanding of how the art world operates in comparison to the financial markets.

YOUR ART WEALTH MANAGEMENT COURSE COMES WITH CE CREDITS FROM WHICH INSTITUTIONS?

By meeting very specific criteria, the program has been accepted by the CFP Board for CERTIFIED FINANCIAL PLANNER™certification, by the Financial Planning Standards Council (FPSC) for CE accreditation, and by CECAP for IIROC Professional Development CE.

It is the only active continuing education program that focuses solely on art wealth management, according to Mary Kay Svedberg, director of education at the CFP Board.

IN OUR NEXT LRFA BLOG POST, JULIA WILL EXPAND UPON THE EDUCATIONAL PROGRAMS THAT ONE ART NATION OFFERS PROFESSIONALS IN THE ART WORLD. THEY ARE SO COMPLETE, THOROUGH AND INTERESTING AND CAN NOT ONLY GUIDE SOMEONE ASPIRING OR NEW TO THE FIELD BUT ALSO PROVIDE PHENOMENAL REFRESHER COURSES FOR THE SEASONED PROFESSIONAL.

EVERYONE IN THIS BUSINESS SHOULD HAVE A LOOK!

UNTIL THEN!