Why do banks buy art and will they continue to? BBC podcast

ART PATRONS BANK COLLECTORS 

How has the 500-year-old tradition of art patronage by banks changed, particularly after the events of 2008? Why do banks collect art? Will they continue to collect after the Financial Crisis and if they do will their reasons for collecting change? Razia Iqbal asks art advisors and staff of banks including Deutsche Bank and the Royal Bank of Scotland in a Wise Buddha production made for BBC Radio 4. 

Anish Kapoor, Turning the World Upside Down III, Deutsche Bank Collection

Art has been bought by banks for all kinds of reasons over the centuries. In the Middle Ages art patronage helped banking families wash away the sin of usury and gain social status.  In more recent times art was bought to decorate boardrooms and for investment. Pre-recession banks came full circle and art collections were actively used for image management again. The events of 2008 have now created a double pull for banks with art collections: should they sell which would help their image of prudent fiscal management or should they keep and share their collections with the public who now own many of them.  Iqbal’s programme hints at intriguing echos: there may no longer be a need to atone for Christian guilt but corporate guilt is perhaps another matter. The podcast is no longer accessible but here are some snippets. 

Bank collectors buying wider range of media 

Alex Heath, Managing Director of Independent Art Consultants which sources art for Barclays Bank amongst others says that the type of works which banks are interested in buying have changed in the recent past. “It is now less about straight painting and prints” and more about bringing “variety into the workplace”‘ with other media. 

Art now part of marketing mix 

In the past many banks bought works for decorating public spaces and board room he explains and over time the pieces accumulated into collections. More recently though he says that art is used consciously as part of the marketing mix. He describes how, in his work with clients, the marketing department or agency is his first port of call where he will ask “‘What do you want to say about the bank?” and from there he will generate art ideas which will complement the marketing message. 

Deutsche Bank recognised by peers 

Asked if he thinks that banks are cautious in their purchasing decisions, favouring traditional over contemporary works, he explains that there are banks which are taking leading positions as collectors of contemporary art and particularly singles out Deutsche Bank as “‘doing very well” at this. 

Art for staff, art to stimulate intellectual curiosity 

Alistair Hicks adviser to Deutsche Bank, which has a collection of over 56,00o pieces, shows Iqbal some of the works in the Deutsche Bank lobby, corridors and board rooms and explains the bank does not buy for investment.  Deutsche Bank’s primary purpose in buying art which began in the 1970s as an initiative called “Art in the Workplace” is to stimulate the intellect of its staff. “A good banker has to be curious about what is going on in the world and artists play a leading role in expressing current ideas”. 

In the lobby an early spot painting by Damien Hirst is reflected in an Anish Kapoor sculpture called “‘Turning the World Upside Down”‘. Iqbal is invited by Hicks to come around and inside the “almost spiritual” sculpture to experience its echo effect. Artwork is so intimately integrated into the environment of the office that boardroom are named after artists and Kapoor’s sculpture, affectionately known as ‘The Silver Ball’, has been adopted as a meeting point “We are in the Freud room. Meet you at the Silver Ball in 5”.

Art atones for sin 

Banks have traditionally been patrons of the arts with the first significant example occurring in Italy in the 1300’s when a banker commissioned a chapel containing religious artworks to atone for the sins of the family who had gained their wealth as bankers at a time when money-lending with interest was regarded as sinful by Chrisitians. 

Art for social status 

Iqbal explains that the Medicis in the fifteenth century, developed the concept of patronage considerably but used art not to atone for the family’s sins but rather to elevate its status. Artworks funded by gains from the prosperous Medici bank became a means to help the family gain public prominence, access and power and eventually noble status. 

What will banks do with art collections after the Financial Crisis? 

In an interview with the management of the Royal Bank of Scotland which since the Financial Crisis 2008, is now almost entirely public-owned, Iqbal learns about their strategy for the Barclays art collection going forward.  

Acknowledging that the trust of the public has been lost and taxpayer money needs to be refunded, the art collection strategy of RBS comprises three parts: art of historical importance will be retained, loaned out and made accessible to the public, some art will be retained for decorative purposes and the strategy towards the remaining part of the collection is to become “net sellers”. 

Though the reasons why banks buy art may change over time, Iqbal points out that banks’ tradition of collecting art stretches back over 500 years so probably won’t change any time soon. Do you agree? Leave your thoughts below. 

Related posts: 

• Deutsche Bank signs 5 year lead sponsorship deal with Hong Kong art fair – Dec 09
• The Power 100: Curators up and artists down in ArtReview’s annual list – Dec 09
• Art loans can offer liquidity to your collection – Nov 09
• Which museums are collecting Chinese contemporary art? New database just released – Nov 09
• Louis Vuitton, the fine art of branding – Passion for Creation review – July 09

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Crisis to impact art prices, number of Asian collectors increases – Business Times

ART PRICES FINANCIAL CRISIS

With fear at near panic levels recently in the stock market, it would seem almost anomalous that life goes on in some segments of alternative investments. No, we’re not talking about hedge funds or commodities, both of which suffer the whiplash dealt by severe market plunges. Instead, welcome to the rarefied world of art collection and investment. Proponents of the segment argue that art, being a real asset and devoid of the mind-numbing complexity of derivatives, should retain its sheen as a ‘passion’ investment.

Art is tangible with inherent value says Christie’s

Says auction house Christie’s president (Asia) Andrew Foster: ‘We stand in a curious position. Art is a very real and tangible thing. Clients agree that art has inherent value. So you start with the proposition that it’s not a highly leveraged investment. That’s almost refreshing now.

‘That doesn’t mean prices don’t fluctuate, but value is agreed upon and inherent, and it springs from cultural and global trends more than trading multiples.’

Christie’s confident about November Hong Kong sales

Christie’s recently exhibited highlights of its upcoming Fall 2008 auction in Hong Kong, to take place at end-November. ‘Our sales are nearly two months down the road; we’re confident markets will calm down,’ says Mr Foster.

Art, however, isn’t that impervious to the fallout from the evaporation of trillions of dollars in stock market value. Nor is it immune to the belt tightening that has ensued as individuals brace for more difficult economic conditions.

But recent Borobodur and Sotheby’s Asian auctions disappointing

Two auctions of Asian art last weekend, for instance, fell short of pre-sale estimates. Borobudur Auction’s two-day sale of Chinese and South-east Asian art fetched nearly $10 million, compared with pre-sale expectations of $18 million.

The recent Sotheby’s sale of contemporary Asian art in Hong Kong was also disappointing, with a number of works unsold or drawing bids below reserve prices.

Citi Art Advisory – stock market drop causes short term bounce and longer term fall

Citi Private Bank’s art advisory service senior vice-president Suzanne Gyorgy says that a prolonged economic downturn will take its toll. ‘A downturn in the equities markets often initially causes investors to turn to tangible assets. The art market can benefit from this turn to alternative investments with a bounce in the value, counter-cyclical to the equities markets.

‘However, a prolonged economic downturn in the equities markets will first result in a softening of the real estate market which is then followed by a downward adjustment in the art market.’

Asia undergoing structural change: more collectors

Still, the last few years’ robust pace of wealth creation is likely to have expanded the catchment of wealthy individuals globally for whom art is a passion, particularly in Asia. Christie’s own Asian sales are a testament to this. Last year, the firm’s Asian art division reported sales of US$654 million, a 49 per cent rise from 2006. Growth has been at a strong double digit clip since 2004.

Asian art showed broad uptrend even in Asian financial crisis

‘What is interesting about Asian art, from the period which includes the Asian financial crisis and a downturn in the West . . . global Asian art grew every year through that period. The broad trendline is up. This isn’t a surprise, because all the long-term economic indicators and information about this century is that it will be an Asian century,’ says Mr Foster.

He concedes that wealthy individuals may have sustained substantial losses in equities in recent months. ‘People need to recognise the losses in the context of the gains in the last three to four years. We’re talking about a tremendous, unprecedented increase in global wealth. It’s natural to have a correction.’

Citi Art Advisory predicts softening for mid value works

Citi’s Ms Gyorgy agrees. ‘Today, with the vast amount of newly created wealth across the globe, even after this recent economic turmoil, we are likely to continue to see record prices for the remaining top tier master works . . . by sought after artists, but expect to experience a softening in value for mid-level works.’

Art captured second largest share of ‘passion’ dollar of rich

Passion investments merited a highlight in Merrill Lynch and Capgemini’s 2008 World Wealth Report, which found that art captured the second-largest share of the global wealthy’s passion dollar at 15.9 per cent, after luxury collectibles (16.2 per cent). Among the well-heeled in Asia-Pacific, art’s share of their passion dollar was 13 per cent.

The most frequently quoted indicator of art’s investment returns is the Mei Moses Fine Art Index. Its index for all art for 2007 rose 20 per cent, a performance only surpassed by some of the annual returns achieved in the art bubble years of 1984 to 1990, it says on its website. This dramatically outpaced the 5.5 per cent achieved by the S&P 500 total return index. It was, however, outpaced by gold which rose over 30 per cent.

In the most recent five and 10 year periods, art trumped stocks, according to the index. Art returned 16.2 and 10.3 per cent per annum in the respective time periods, compared with stocks’ returns of 12.7 and 5.9 per cent, respectively.

1985 to 1990 art index up 30% per year then shed 65% 1990 to 1995

Yet art, too, has its boom and bust cycles, as Michael Moses, the creator of the index, told Reuters earlier this year. From 1985 to 1990, Western contemporary art values rose at an annual compound rate of 30 per cent, before shedding 65 per cent in the next five years, he said.

Now, one of the most frequently raised questions is whether there is a bubble in contemporary art, particularly by Chinese artists. Ms Gyorgy says: ‘In this economic climate, the portion of the emerging art market that has recently experienced huge jumps in value on the high end are poised to experience the greatest price correction.’

Only some artists survive a pricked bubble

She says that a similar spike in value and dramatic correction occurred in the 1980s and early 1990s for many ‘newly minted art stars’. ‘With the passing of time, a number of the 1980s artists have regained their value and place in the art market, and some have not survived the test of time. I expect we will see art market history repeating itself.’

Citi advises clients to do their homework, talk to experts and collectors, and to research great collections. Buyers should also learn how to evaluate the condition of art works, visit auctions and learn how to negotiate with private dealers.

New art fund launched to focus on emerging art markets

Art funds are also an option. Meridien Art Partners is working with Calamander Capital to launch the Emerging Art Market to invest in contemporary art, scouring the markets of South-east Asia, Vietnam, Russia and the Middle East. The fund has so far raised about US$10 million and the partners will be gearing up to market the fund to European, Russian and Middle Eastern clients as well.

Ultimately, you must love the piece that you buy. As Citi says in its art advisory material: ‘We do not recommend that clients buy art purely for investment. . . There are many other investment vehicles that give higher or more predictable returns than art.

‘The art market is a fickle place, but art can be a good investment if you take a long-term strategy, do your homework and are well advised.’

This article was first published in The Business Times on October 18, 2008

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Art consultants choose Singapore for Asian headquarters – International Herald Tribune

SINGAPORE ASIAN ART CENTRE Fortune Cookie Projects, a curatorial and art consulting service set up in 2006 by Mary Dinaburg and her partner Howard Rutkowski, has recently established their headquarters in Singapore.

The decision to open an office in Asia is a reflection of the rise of Asian art and the importance of Asian collectors in the world market, they said.

“All the international art world knows that Asia is beginning to be a major player and will be even more so,” Dinaburg said. “Galleries, artists, museums want to be in this part of the world, but they don’t know it, so for us it’s a perfect opportunity to work with them, to be their outpost.”

Singapore’s advantages: financial hub, English language, free port facility, space

While the partners considered several locations, including Shanghai and Hong Kong, they say they finally decided on Singapore because of its central geographical position in the region and its wide use of English. But most importantly, it is a financial hub for private wealth, and the city is setting up a free port with what Rutkowski called a “Fort Knox-like,” state-of-the-art facility to house works from all over the world.

Right now, the only other free ports for art are in Zurich and Geneva, he said. With a gross floor area of approximately 22,500 square meters, or more than 242,000 square feet, for Phase 1 (and an additional 24,000 square meters for Phase 2, to be completed in 2011), the Singapore FreePort will include showrooms, workshops, photo studios and private offices. Due to be completed toward the end of next year, it will be directly accessible to Changi Airport.

“The FreePort is a huge asset to the development of the art market here,” Rutkowski said. “There will be huge, secure warehouses, with no duty or taxes paid; a place for people to park their art safely for as long as they want and in total confidentiality.

“We also felt Singapore was a better place to set up shop than Hong Kong, because it has a much better infrastructure in terms of museums and exhibition spaces. Hong Kong doesn’t have space. When we did the Julian Schnabel show we had to transform office space, because major contemporary artworks, such as his, require proper presentation.”

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Western art advisors turn to Asian new media art for their corporate clients – International Herald Tribune

NEW MEDIA ART FROM SOUTH EAST ASIA FOR COLLECTORS

Fortune Cookie projects, an art consulting service with clients who include Clifford Chance, Hermes, UBS and Saatchi, plan to set up headquarters in Singapore this year and they are on the look out for Asian new-media artists whom they can introduce to the West.

“Chinese artists have been the flavor of the month for the last five years,” founder Rutkowski said. “That will not cool, but it will change a bit. International collectors that went in early have got their works and they won’t buy an artist that they got for $20,000 a few years back for $4 million now; if anything, they’re going to sell. So many are looking along the Silk Road, and there is a very strong interest in the Southeast Asian region.”

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New art fair sets up in Singapore September 2008 – International Herald Tribune

SINGAPORE ART FAIR 9 to 12 September

Asian contemporary art has seen its star rise markedly in recent years. Yet the region has yet to produce art fairs to rival those in the West like Art Basel in Switzerland, Frieze Art Fair in London, the Armory Show in New York and Art Basel Miami Beach. In the past year, two new contemporary art fairs have gained considerable attention because of their sheer size – ShContemporary in September in Shanghai and Art HK in May in Hong Kong – but they are still far from being seen as equal to their Western counterparts.

Now, a new entrant, Singapore Showcase, is also hoping to be noticed. With 23 major international galleries, it is very much a boutique fair, but those attending include marquee names in international contemporary art: Sperone Westwater and L&M Arts from New York to Galerie Thaddaeus Ropac from Paris, SCAI the Bathhouse and Tomio Koyama from Tokyo, Arario Gallery from Seoul, Hanart TZ from Hong Kong and ShanghART from Shanghai.

“It would be enormously presumptuous to say we’re going to be the Basel of Asia, but the standards that we’re trying to push here and emulate are those of the Armory or Basel, on a smaller scale,” said Mary Dinaburg, principal of Fortune Cookie Projects, the curatorial and art advisory consultancy behind the new fair, which runs Sept. 9-12 and coincides with the opening of the second Singapore Biennale.

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Zhukova, girlfriend of Abramovich opens new 92,000 sf art space in Moscow 2008 – International Herald Tribune

Daha Zhukova, Abramovich

 

 

 

 

RUSSIA NEW CONTEMPORARY ART SPACE opens September 2008

Dasha Zhukova is to open a contemporary art space in the Bakhmetevsky Bus Garage, a giant red-brick Constructivist-era landmark near the Olympic Stadium in Moscow. Popular with architects the garage was designed in 1926 by Konstantin Melnikov.

“I thought Moscow should have a space like this for contemporary art,” Zhukova said. “There is a huge thirst for knowledge among the younger generation for contemporary art, but most of them learn about it by going on the Internet.”

Under its new name the Garage Center for Contemporary Culture this 92,000 square foot space will open next month and its first show will be a retrospective of the artists Ilya and Emilia Kabakov.

Zhukova herself acknowledges being a relative art neophyte. “I didn’t study art history and don’t remember names of artists,” she said. “But if I like an image, I remember it.”

Born in Moscow in 1981, Zhukova is an only child. Her parents divorced when she was young, and when her mother, a molecular biologist, took a job at the University of California, Los Angeles, in the early 1990s, they moved there. Zhukova spoke not a word of English. But she quickly adjusted, she said, attending schools in Los Angeles and then the University of California, Santa Barbara.

A year ago few people in the art world had heard of her.

Zhukova said she isn’t modeling the Garage Center after any specific museum. “I’m taking different aspects of different institutions that are inspiring influences,” she said.

Besides aid from Abramovich, financing is also coming from other private sources and corporations. Admission will be free.

After the Kabakov exhibition that opens next month, the Garage Center plans to exhibit works from the collection of Christie’s owner, the luxury goods magnate François Pinault, whose foundation is based in the Palazzo Grassi in Venice. Dent-Brocklehurst said she was considering commissioning artists to create site-specific works for the space, analogous to installations in the vast Turbine Hall at the Tate Modern.

Asked if the Garage would have its own collection, Zhukova said that would be many years down the road, if ever.”For now I’m trying to learn as much as I can to make up for my lack of art history,” she said. “The more I read, the more I realize what I don’t know.”

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