Artfonds 21 – A very different art fund


Artfonds 21 sold limited editions of this print by Baldur Burwitz.

At first glance, Artfonds 21 looks like a very formal art fund. Based in Frankfurt, Artfonds 21 AG is a German stock corporation, which works with Artfonds 21 Künstler GbR. Its founders – Rik Reinking, an art historian and curator, and Dr Martin Bouchon, a German capital markets lawyer – have both art and finance knowledge.

But first appearances can be misleading. Bouchon – who is meant to be the hard edged, corporate finance lawyer – is happy to stress that the sole purpose of Art Fonds 21 is not making money. “Art is the perfect asset class. It is moveable – unlike real estate – and it can go up in value,” says Bouchon. “But the rise in value is a nice side aspect for us.”

Despite not focusing on returns, the fund is doing pretty well. It launched in December 2007 with Eu57,000. It has now raised about Eu350,000 ($440,000) from 20 investors, which is invested it in about 50 works. “We have not made any professional valuation but we think that the market value has at least doubled within the last seven years which is a rise of about 10 per cent per year,” says Bouchon.

Bouchon says that Reinking is the key to the fund’s success. “Rik is amazing. When others are running that way, he runs over there.”

“Take urban art. As a lawyer, my first thought is that this is destruction of property. I mean my kids did it and I was always worried that they will get arrested,” says Bouchon. “But Rik was certain there was something there and the more that you look into it the more you realise that there is a group of serious artists out there – working together like the Impressionists did and doing really exciting work.”

Reinking was for example an early fan of JR, the French photographer and street artist. “We bought four works in one of JR’s first exhibitions in Berlin in 2007 and helped finance one of his first projects,” says Bouchon. “Today he works with Perrotin, and others, but at the time he was still not well known.”

In 2014, the fund took a group of investors to see JR’s exhibition at Baden Baden‘s Frieder Burda Museum where some of the fund’s works were exhibited. “It was really nice to show some of our other investors why the work is so important,” says Bouchon. Investors in the fund can also lease pieces for one per cent of the value per month. Bouchon has taken advantage of this himself.

 “Art is one of the toughest businesses in the world and being an artist is one of the toughest professions.”

Rather than returns, Bouchon is most proud of how the fund has supported upcoming artists. “Art is one of the toughest businesses in the world and being an artist is one of the toughest professions,” says Bouchon. “Thanks to the good contacts of Rik we were often able to help artists in early or difficult phases of their life.”

“We bought five large works from Dimitris Tzamouranis when he had just lost his art dealer and was quite depressed,” says Bouchon. “Today he is with Michael Haas in Berlin and has a long waiting list for his works, but at the time it was different.”

As well as encouraging museums and galleries to borrow pieces, Artfonds 21 lists all the work it owns. It also uses the pieces it owns to publish limited edition prints. Half of the sales of these go to the artist and the rest is used to help cover the fund’s running costs.

The first edition, in 2008, was two series of five potato prints by Johannes Esper. The second edition was, a smaller version of Baldur Burwitz’s Paris Bar photograph. It made 25 signed copies.

Artists can also invest in the fund by donating art works to the funds. It bought two pieces from one artist who then donated seven smaller ones in return.

The fund typically buys from artists and dealers but it has also bought opportunistically from auctions where it believes pieces are undervalued.  “We love buying direct from artists but we also value dealers and are always happy to work with them,” says Bouchon. Dealers can also invest in the fund by discounting their commissions.

“Good art will rise in value, some more, some less, that is the same as in the stock market.”

The fund deliberately takes a long term view. It buys art planning to hold it for at least seven years but normally longer. “We have a different perspective to other art funds,” says Bouchon. “We are not looking for short-term gains from selling works, instead we are looking for the value of the fund to rise.”

“We only want to buy high quality art without considering the immediate rise in value. Good art will rise in value, some more, some less, that is the same as in the stock market,” says Bouchon. “It is like venture capital: if you have one or two out of 10 who succeeds, that makes up for the rest, and with regard to those pieces that do not rise in price: the better for us personally because we will be able to buy it back from the fund and can still afford it.”

In October 2014, seven years after launching, Art Fonds 21 sold it first three pieces at Bonham’s. Speaking before the sale, Bouchon was not particularly excited about making their first cash return: “I am actually really sad that the pieces are leaving our collection,” says Bouchon. “I have had them on the walls of my office and will really miss them.”

Despite his misgivings the sales went well. One photograph acquired for Eu 3,0000 in 2007 sold for £14,062 (£18,750 with  buyer’s premium). The other two also sold well and the fund had a return of more than 10 per cent per annum on these investments.

When the fund first launched the founders had planned to get it listed on a stock exchange. Bouchon says that could still happen, but at the moment Artfonds 21 AG plans to launch another closed fund with a fixed term of 10 years  now that we have a track record, with Artfonds 21 acting as the manager of the fund.

However, the focus will not just be on making money. “We are in fact more like an art collector club. We set this up in 2007 and much later I read about the La Peau de L´Ours [or Bearskin Club] fund in Paris at the beginning of the last century and which was dissolved after 10 years with great success. “I think that we are somewhat similar to that fund,” says Bouchon. “I do not know whether we will have the same success though, I mean they purchased some of the best art of their time.”