Funds target emerging markets for hedging against slowdown

Funds target emerging markets for hedging against slowdown
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First Published: Fri, Mar 21 2008. 12 23 AM IST
Updated: Fri, Mar 21 2008. 12 23 AM IST
London: Art investment funds are expanding in emerging markets such as West Asia, India and other parts of Asia in an attempt to weather an economic slowdown.
New funds are being set up outside the US and Europe with the dollar this month at its weakest since the euro’s debut in 1999 and US stocks touching their lowest level since 2006. About 60% of contemporary-art lots failed to achieve expected prices in London sales last month, research company ArtTactic said. Traders at the Tefaf art fair in Maastricht, Netherlands, said demand fell from US buyers.
“We see the Middle East (West Asia) as the next major market to take off,” said Andrew Littlejohn of New York-based Meridian Art Partners Llc. He is starting a fund “also focused on contemporary art in India, Asia, Russia and Africa”. The Fine Art Fund, based in London and started in 2004, is investing in Chinese and Indian works too.
Over the last five years, managers of art investment funds, which buy and sell a pool of works for a set management fee and a share of any profit made, have been keen to promote art as an alternative asset class. So far, the Fine Art Fund is the only one of these vehicles that has remained conspicuously active in the West.
Collectors of Western contemporary art have been buying selectively after an 11-year period of price appreciation ranging from 2.5 times to as much as five times, according to index-maker Art Market Research.
“New markets have the best opportunities and we want to offer them to sophisticated investors,” said Littlejohn, a former Phillips de Pury and Co. manager who worked in New York, London and Asia.
More than 10 billionaires are among those who have invested up to $110 million (Rs445.5 crore) in the Fine Art Fund, its chief executive officer Philip Hoffman said. In 2006, he launched a Chinese Fine Art Fund with an initial target size of $10 million.
“We stopped buying Chinese contemporary art for that fund nine months ago,” said Hoffman, a trained accountant who formerly worked for Christie’s International Plc. “We’re now looking at other areas. I’ve just bought a piece of 18th-century Chinese Imperial porcelain for $1.5 million.”
This January, he opened an Indian fund, projected at $25 million. He said the fund was registered in Delaware, so it wouldn’t be affected by the Securities and Exchange Board of India’s recently issued guidelines on art funds.
“The Middle East has a big potential upside, but I’m nervous about it,” said Hoffman. “We don’t like to enter a speculator’s market. That’s why we never buy Damien Hirst.” He plans a West Asian fund that he hopes will attract investment of $10 million.
London dealer Serge Tiroche, a former Citigroup Inc. banker, said that he and his brother Micky plan to start a fund called ArtPlus, specializing in Impressionist, modern and contemporary art, in the second quarter of 2008.
ArtPlus aims to raise $100- $200 million in the form of shares and will hold “blue-chip” works and engage in short-term trading and “art finance”, the fund’s prospectus said.
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First Published: Fri, Mar 21 2008. 12 23 AM IST