Shiv Karan Singh has been collecting art he loves for more than two decades. Art, says the suave former banker with Merrill Lynch in New York, is a “very private thing”—not a subject to discuss at social gatherings.
Yet, in the winter of 2004, over in New York, he did the unusual when he met three close friends —a former colleague at the bank, an old squash partner and a third with a flourishing private business. Instead of the usual heart-to-heart about sports, money and women, they discussed art.
Singh, who runs an offshore business consultancy in New Delhi, convinced his friends that art is a stylish asset. They could make a killing if they invested in their sense of aesthetics as sharply as in the money market.
They went on to form Mirchi Arts (Pvt.) Ltd, a small art fund operating from the first floor of a house in New Delhi’s Defence Colony, in one of the meandering lanes behind the main market, last year. Singh won’t disclose the names of his investors, but added that the four partners had together invested half-a-million dollars.
Within days of coming into existence, Mirchi Arts bought a painting by A. Ramachandran for Rs34 lakh. This was one of Ramachandran’s typical oils of a woman sitting by a lotus pond. In less than a week, the work was resold for Rs37 lakh.
Mirchi Arts has bought at least a dozen works from dealers, collectors and galleries, when “the price was right”. These included a bronze head by Jaipur-based sculptor Himmat Shah and an abstract work of natural elements by painter Ganesh Haloi. By simply buying and selling in the last eight months, Mirchi Arts witnessed a combined return of 58%.
“When we get a good price, we buy immediately and if we can book profit, sell fast,” says Singh, pointing out that, “time value for money” is paramount here.
Now that he views art like a stock, Singh’s approach to art has undergone a change, too. “I now have to look at art dispassionately,” he says. “After all, I have to maximize returns for my investors and minimize their risks.”
After the hype over soaring Indian contemporary art prices, investors are turning to the next most fashionable opportunity: art funds. While Singh’s is a private fund with only friends pooling in resources, at least five art funds worth a total of Rs250 crore have entered the public sphere in less than two years.
Many more funds are expected to follow this year, with even Bollywood stars Sridevi and Anil Kapoor committing to support the Rs20-25 crore Marwah Art Fund. It is expected that this venture will be launched by the New Delhi-based MEC Art Gallery before the year ends.
Investor Philip Hoffman, who founded the Fine Art Fund, has announced plans to launch a $20 million fund between April and May this year in India. This fund was initially launched in the US three years ago. Hoffman says he is tying up with several collectors in Delhi and has a team of 30 experts to back him with research on Indian art.
Investing in art for pleasure and looking at it as a business proposition are two different things. As Pheroza Godrej, owner of Cymroza Gallery in Mumbai, puts it: “It’s not always aesthetics that counts. What appeals to an investor is how art can appreciate,” she says.
Godrej, along with Sarayu Doshi, former director of Mumbai’s National Gallery of Modern Art, were appointed art advisors for the India Art Fund. This fund was launched by the Kotak Mahindra Bank’s wealth management division last year. The Rs25 crore fund attracted 80 investors. Over the last six months, both women have been scouring the country, having visited more than a dozen studios in as many as seven cities, including Visakhapatnam, Vadodara and Hyderabad.
“Since we know most artists extremely well, we are collecting them directly to save commission and avoid paying premium,” Godrej says, refusing to divulge the names of the artists. But she added that the fund will refrain from trading. “We will wait for the prices to appreciate and expect the prices to double by at least half,” says Godrej.
The response from the 31-year-old promoters of the Rs40-crore Crayon Capital Fund, which closed in December, is equally buoyant. “We hope to see 30-40% return every year,” says Amit Vadehra, who has an office in Vasant Vihar, Delhi.
In the middle of last year, over 600 investors put in their money in Osian’s Art Fund, launched by an arm of Osian’s auction house, and raised Rs102 crore. Crayon pulled in 400 investors for the fund, oversubscribed by Rs20 crore. Yatra Fund, the first fund to go public in 2005, closed its second Rs 25-crore fund in January. “The funds are doing well and we expect a minimum 15% return every year,” says Geetha Mehra, owner of Sakshi Gallery and trustee of Yatra Fund.
The flip side of the rosy picture is that not every art fund will produce blockbuster results. The art-investment market is new with no proven track record. There is also a concern that since most art funds are close-ended for between three and four years, the market may be flooded with artworks at the same time. This swell in supply might push prices down, says an expert who did not wish to be named.
Hoffman, a former deputy managing director with Christie’s in charge of the European Old Masters Division, says prices of Indian art are already “over-hyped”. “Some artists have huge records. But we won’t be investing in them and will only look at art that has real value and look at opportunities in the long term.”
Fine Art Fund is the only fund with a global presence in three continents and deals in impressionists, modern and contemporary art. Art economist David Kusin, a former curator with Metropolitan Museum of Art, says several art funds were launched similarly in the US three years ago, but only one—the Fine Art Fund—went into business.
“From the statistical point of view, there is enough data to understand how art as a commodity works in the marketplace,” he says. “But we don’t know how art funds will work as we have no evidence to lean on.”
Kaushik Datta, partner of consultancy firm PricewaterhouseCoopers, which is advisor to Crayon Capital, maintains that art is an “imperfect market”.
“A handful of operators and galleries manipulate prices. What you see is not a fair market price,” he says.