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Wed 26 Jan 2011 01:55 PM

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Emirates NBD to offer art advice to rich investors

Lender’s private banking arm to tie up with Fine Art Fund Group to push art as an asset class among wealthy clients

Emirates NBD to offer art advice to rich investors
ART ADVICE: Emirates NBD will partner the Fine Art Fund Group to provide art advice to high net worth individuals (Getty Images)

Emirates NBD’s private banking arm will partner with the London’s Fine Art Fund Group to provide art advice to high-net-worth clients eying the sector as an asset class.

“Middle Eastern investors are expressing greater interest in art,” said Gary Dugan, chief investment officer at NBD Private Banking. “This partnership will enable us to provide value-added advisory services to our clients, who with to include art as a percentage of their investment portfolios.”

Philip Hoffman, CEO of the FAFG, said MENA was currently at the “rear end” of art investment, but that it would become a key player in the coming year with the opening of Abu Dhabi’s branch of the Louvre, art initiatives in Qatar and Kuwait and the growing popularity of art from Egypt, Syria, Lebanon and even Iraq.

“We see the Middle East going from a low spending profile to a high spending profile,” he said. “We’re going to see a massive growth of spending on art.”

In 2010, about 25 percent of the more than 100,000 works of art sold on the international market went to buyers from the Middle East, Russia and Asia – emerging markets competing with traditional powerhouse Europe.

FAFG will operate by commission, with NBD paying the group a two percent management fee and 20 percent of profits. If a piece of art sells for $1m – but not at a profit – FAFG just pockets the management fee.

With art collection relatively new to the region – Christie’s is celebrating its 10-year anniversary in Dubai – many high-wealth individuals looking to invest in art lack the expertise to know what to buy and how much to pay.

FAFG’s executives will tell them which artists to invest in and help negotiate with galleries and dealers.

“We bring our expertise, and they put up the capital,” Hoffman said of NBD. “Clients from the Middle East are saying, ‘we want to put money in art – we’re happy to spend $10,000 without expertise but not $10m.’”

Both said the partnership would treat art as a money-making business.

“This is a financial opportunity… not interior decorating,” Dugan said.

“We’re looking at it as a long-term storer of value, an inflation hedge,” Hoffman said. “Art has traditionally yielded high returns and shown a low correlation to other asset classes… people want to buy art for investment purposes. They want the safety of knowing you can physically hold it. We look at art as a long-term investment.”

In October, Christie’s set the new record for Middle East auction sales, $14m, including the sale of Mahmoud Said's 1929 painting ‘Whirling Dervishes’ for $2.5m. It more than doubled the presale estimate of $6.7m.

FAFG was the first fund to invest in art as a worldwide asset class and has offices in Dubai, Europe and the US.

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