Wealthy investors eye artwork as safe haven as debt woes force collectors to sell
As the stock market gyrated sharply in recent weeks, New York art dealer Asher Edelman began receiving calls from clients asking to sell works they owned by major 20th-century artists, including Pablo Picasso, Roy Lichtenstein and Robert Rauschenberg.
And the sellers - collectors, investors and other dealers - were willing to take about 20 percent less than they would have only a couple of weeks earlier, Edelman said.
“I think there’s a big fear factor out there,” said Edelman, a former Wall Street investor and the founder of art- financing company Art Assure Ltd. “People are afraid of what’s going on in the world and they want to take some cash out of their art.”
This month’s wild swings of the stock markets included the Dow Jones Industrial Average alternating between gains and losses of more than 400 points for four days in a row during the week ending August 12, the longest such streak ever.
“Whenever you have stock price declines, you do get a lot of margin calls, and people look for any form of liquidity that they can find,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin.
Some art owners try to sell privately and avoid the risk of having the work flop at auction. Others are looking for a financial guarantee by a third-party before putting art on the auction block. Many are using their collections to obtain credit lines.
“In the last three months, we’ve seen an increase in new clients who want to use art as collateral for loans,” said Suzanne Gyorgy, director of art advisory and finance services at Citibank’s private-banking unit. “They anticipate market volatility and want to have liquidity available for investment opportunities.”
Art Finance Partners, a private New York firm that also lends money using art as collateral, saw a sharp rise in inquiries this month, according to partner Meghan Carleton.
“People need to figure out where their sources of capital may be coming from in the next 30 to 60 days,” she said. “It’s about short-term liquidity.”
The art market’s top tier would likely benefit because it’s increasingly seen by collectors as an alternative to the volatile capital markets, dealers and analysts said.
“We expect a very strong auction season this fall as high-net-worth individuals globally reallocate more funds into top-quality art for value-preservation purposes,” said Sergey Skaterschikov, founder of Skate’s Art Market Research, in an e- mail.
Art dealer Mark Borghi, who operates galleries in Manhattan and Bridgehampton, New York, sold about $4m of art in the past three weeks. Among the works was a $1m painting by Joan Mitchell and a $125,000 drawing by Ed Ruscha.
“It’s a spike for sure,” said Borghi, whose clients work on Wall Street and at hedge funds. “Since this whole turmoil has started, I’ve had meetings with new collectors who are tired of the stock market and want to invest in the art market.”For all the latest art news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.