There is growing evidence that financial institutions are looking much more seriously at art as an asset for investment and loan guarantees.
A Reuters report out last week noted that
UBS Wealth Management America had unveiled a $150m loans programme
using art and antiques as collateral in a bid to capture a larger
slice of the ultra-high-net-worth finance market.
This follows the publication earlier this
summer of Wealth Insights, Profit or Pleasure? Exploring the
Motivations Behind Treasure Trends, a detailed report in which
Barclays Wealth Management looks at the issues and risks involved
in diverting capital from traditional investment vehicles.
What this does not seem to be is a liquidity
free-for-all for those involved in the international art and
antiques market. Financial experts exploring the potential of art
as an asset class are well aware of the emotional element of
investing in this sector and the unpredictability of some of the
more intangible factors that can affect its performance.
The introduction to Barclays' report, for
instance, notes: "It has long been known that investors in equities
and other financial asset classes can be susceptible to a host of
cognitive biases that make it difficult for them to make rational
decisions. With art, wine and other treasure assets, these biases
can be even more pronounced."
Nervousness and unwillingness to back art
investment remains the signature of many banks and financial
institutions. At this year's LAPADA Conference, Richie Coulson of
Lloyds TSB dismayed delegates by admitting that neither his bank
nor any high street names had the time or resources to understand
Now, however, with even the traditionally
safe areas of bonds and gilts seen as risky, the art market is
being seriously reassessed. The potential of this largely untapped
asset class, set against a backdrop of ongoing global economic
uncertainty and tougher financing conditions across the world, has
made buying in the right expertise an increasingly viable
Barclays Wealth, for instance, drafted in
Elizabeth von Habsburg, managing director of the Winston Art Group,
and Philip Hoffmann, chief executive of the Fine Art Fund, as well
as leading art market analysts Don Thompson and Dr Sara Thornton as
part of their 13-strong investigative panel for their report.
Meanwhile the UBS WMA programme is being
underwritten by Emigrant Bank Fine Arts Finance.
On the loans side of the equation, checks
and balances to limit risk include limiting deals to the ultra
wealthy, who enjoy a wide spread of other assets, loaning no more
than 50% of the professionally assessed nominal value of the art in
question and charging a healthy rate of interest, quoted as
generally being around 5.25%.
For the ultra wealthy looking for liquidity,
such loans enable them to raise cash without disposing of their
assets, thereby avoiding capital gains tax or transaction
Easier access to expertise and the wider
availability of market indices online are helping to make art a
more tempting option for investment. Finance specialists have
already noted the healthy revenue stream generated by the major
auction houses' own finance operations in issuing art-backed loans
Barclays' report concludes: "Collectibles
now increasingly share the characteristics of broader financial
What the wider art market will be watching for now is whether
finance controls will be gradually loosened to open up similar
loans and investment programmes to individuals further down the
chain of wealth.