Art-backed financing grows in sophistication
Forget Brexit and market jitters, art-backed financing has a strong year ahead. Tim Hunter, Vice President of art financier Falcon Fine Art, explains.
Deloitte/ArtTactic’s 2017 art market survey reported that political and economic uncertainty is the biggest risk to the art market in 2018. Really? While no market is completely free from volatility, the art market is a resilient one – based, as it is, on cultural significance, aesthetics and emotions, as well as on market sentiment. For this reason, the art market is relatively independent of geopolitical events – even acting as a potential store of wealth in times of global uncertainty.
So forget Brexit and concerns over market volatility, 2018 looks to be as strong for the art market as previous years (the Art Basel and UBS Global Art Market Report estimated total sales at nearly US$60 billion in 2016, with 2017’s year-end totals looking even higher).
Record prices and a thriving art market imply that it’s the perfect time to sell; but it’s also a time for collectors to take advantage of increasing values by adopting a smart wealth management strategy to grow their collections. Tailored art-backed financing from sophisticated art financiers such as Falcon Fine Art increasingly allows collectors to leverage the value of their art. Such financiers combine structured finance experience gained on other asset classes (such as commodities and property) with extensive fine art expertise – resulting in a range of solutions that increasingly suit the needs and goals of international art collectors.
Art financing’s new sophistication
For a number of years, selected European banks have been offering art-financing services – using works of art in addition to other assets as collateral. However, this is usually for their own customers and lacked flexibility and art-related expertise.
Now, financiers such as Falcon Fine Art are able to craft solutions that allow collectors to keep a financed work at home (rather than in storage, as was previously the case). Equally, a collector may choose to loan a work to a museum while financing it at the same time, which can greatly increase a work’s value.
Indeed, art financing is helping fuel the growth in privately-owned and curated art-museums. Of the 300 privately-owned art museums globally, 200 were founded in the past 20 years, and 60 within the past five years – often thanks to financing. This is an international phenomenon with museums created around the world – from South America to Asia – reflecting the global nature of the market.
Particularly in Asia, collectors are utilising art-backed financing to expand their collections. Financially entrepreneurial at heart, Asian collectors have become well versed in the art of art-backed financing, and of leveraging their assets to build up their portfolios. One article reports that Asia is home to 40 families that hold a collective US$8-US$12 billion of artwork, with the majority of these investments having been made in the past 10 years.
Art financing now global
Yet the concept of art-backed financing, helping collectors derive maximum benefit from their art assets, is a global one. Last year proved that growth in art financing is a worldwide phenomenon – and certainly no longer confined to New York, the birthplace of art financing.
As for London, it remains very much the largest art market in Europe. Last year the city saw its global market share grow from 27 percent in 2016 to 30 percent in 2017 – despite projected headwinds, not least of which is Brexit. So London remains well-positioned to maintain its standing as the centre for art in Europe, and with it art financing. Of course, transactions involve borrowers in not only Europe, but the Middle East and Asia as well.
Today’s art financiers not only create solutions that allow collectors to keep financed artwork in their possession, they are specialists – concerned with helping clients maximise the value of their collections by releasing capital that would otherwise be trapped.
Prior to joining Falcon Fine Art, he worked at Christie’s International Auction House for 16 years, holding positions as Senior Director of Old Master and British Pictures, Head of 19th Century European Art, and Director of Impressionist and Modern Art. He subsequently worked for 5 years as a Director at Gurr Johns Ltd, one of the UK’s leading art advisory firms.
He regularly sits on the Reviewing Committee for the Export of Works of Art, and acts as an adviser to several national museums as well as the Arts Council. In 2014, Hunter was elected a Fellow of the Society of Antiquaries.
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