Alternative assets

Property investors may find themselves among the hardest hit as the UAE shows symptoms of the global financial crisis. Dresdner Bank's Nigel Putt and Anton Simonet explain the benefits of diversifying ones portfolio.

Those who have much of their wealth tied-up in real estate may have been wondering whether now is the time to buy more property, as most weathered investors tend to do during a downturn, a case-in-point is the foreclosure auctions in the US over the past 12 months.

However, the risk-averse may be seeking new alternatives.

"The principle, above all in risk management, is diversification. That's the first thing we would advise," says Nigel Putt, senior executive officer of Dresdner Bank (DIFC), the newly established, Dubai-based subsidiary of Europe's Dresdner Bank AG.

Specializing in private wealth management, the company was present at the private viewing for Bonhams' second Middle East auction of Modern and Contemporary Arab, Iranian, Indian and Pakistani art in Dubai.

Emotional acquisitions

"I think you have to classify investments in different ways. Risk is very often associated with the ability to sell something. If something is easy to sell, it's very often regarded as low-risk," says Putt.

Bonhams' first auction in the UAE was greeted with "astonishing enthusiasm," according to Matthew Girling, CEO of Bonhams for the UK and Europe, raising US$13m with many pieces selling for six-times the anticipated price.

A second auction on 24 November failed to have such an impact and made just US$2.8m - despite 50% of lots being sold - but Putt believes this is not a reflection of the market.

"It's a very emotional acquisition, or an emotional sale. While there are professional investors, the majority of private clients are buying something that they regard as nice to have," he says.

Anton Simonet, Chairman of Dresdner Bank (DIFC) believes this type of acquisition is not right for someone looking to make money quickly, "If you have to sell it tomorrow because you need the money for your company, then you should not invest in art."

Collections

Girling holds a similar disposition, and claims art should not be viewed solely as a speculative investment,

"In auction houses, we tend to avoid the ‘I' word (investment). What we like to say is that we're catering to collectors, not to investors. We don't give advice on investment for a start, that's not our business. We give advice to people who are collecting art," he says.

Perhaps quite rightly, Girling claims it is almost impossible to predict how well many pieces will fare as an investment, "Art isn't something where you can turn to the back page of some financial press and see indices!"

Indeed, the highest selling lot was an untitled piece by Charles Hossein Zenderoudi, one of Iran's leading modernists, which sold below the US$300,000 - US$350,000 estimate - for US$276,000.

Nevertheless, by paying enough attention to the advice offered on putting together a collection, one could potentially end-up with a very valuable asset, but Girling stresses a passion for art is important to achieve this.

"People who do it purely as speculation tend to fail. The people who collect are because they've got a passion for art, they absolutely love it and they do it with their heart, tend to put together a collection that has some coherency, sense and beauty," he explains. It is these collections which Girling believes will always have greater success.

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