Art
Athena Sale - Art Market's Growing Pains
A JV of Carlyle Group and Pictet to deliver "merchant banking" savvy to the art market has been recently been sold. What does this say about the art investment market today?
Chroniclers of the world’s art and investment market are
scratching their heads about a recent deal by New York-based
investment platform YieldStreet to buy
Athena Art
Finance from its owners, Carlyle Group and
Pictet for far less
than what was originally pumped into it.
The development suggests high finance and art do not easily or
always gel.
Trade publications artnetnews and The Art
Newspaper have made much of how YieldStreet (which is
reportedly backed by George Soros) forked out only $170 million
for Athena. Carlyle and Geneva-based Pictet had originally put
$280 million into it when the organisation was originally founded
in 2015.
This news service
interviewed former chief executive and founder, Andrea
Danese, last year, and he gave an upbeat view of how this
business was attempting to apply merchant banking techniques to
the art market. Cynthia Sachs recently replaced Danese as
the chief executive of Athena. Danese has gone on to follow new
opportunities, reports said.
YieldStreet is certainly bullish on a business such as Athena.
“True to our investor-first approach, we are constantly looking
for unique and attractive diversification opportunities,” Milind
Mehere, founder and CEO of YieldStreet, said in a statement
earlier in April. “Athena is the leading provider of credit
solutions for the global art market and has scaled the business
with strong growth and asset performance. Art financing is an
attractive asset class with typically low correlation to the
stock market and low loan-to-values, providing what we believe is
both an exciting and sound new investment option for our investor
community of more than 100,000 members.”
So how valid is YieldStreet’s optimism? Well, it may be that it
has to tweak the business model somewhat and be more realistic
about how much collateral is available and how large any loans
can be, at specific interest rates. A senior art advisor in
London told this news service recently that the art market
doesn’t yet have the depth of liquidity, or pool of available
collateral, to make the model work as effectively as Athena’s
founders might have originally hoped.
The Athena sale might also be a reality check for the art market,
which to outsiders can come across as incredibly glamorous, rich
and a bit mysterious. The market can certainly indicate how
willing HNW individuals are to spend money – a sort of feel-good
barometer. Art has at times also been touted as an inflation
hedge rather like gold or forms of real estate, so it can also
have a safe-haven appeal.
The sector is opening up. Modern technology has affected art
investment, such as by the rise of digital auctions and more
information at buyers’ fingertips. Such moves make it less
opaque, but pockets of inefficiency remain. Regulators are
catching up with a market sometimes known for sharp practice:
recent EU anti-money laundering directives have widened the
regulatory net into this area.
A number of advisors work in the art investment and collections
space. Groups such as Citi Private Bank, to take an example,
advise clients. In the US, this publication’s sister news service
Family Wealth Report earlier this year
honoured Ron Varney Fine Art Advisors for its work in the
space. Art advisory is a way for wealth managers to connect with
clients beyond talking about stocks and tax plans.
YieldStreet wants to “democratise” art investment and art media
pundits wonder how plausible that is when the overwhelming
majority of art financing involves private clients borrowing
against their own art collections. But technology may prove
useful, and it is perhaps easy to see why some Wall Street and
City investment whizz kids reckon there’s money to be made.
Consider some of the figures: artnetnews has cited data
from the European Fine Art Association saying that loans to
independent collectors account for up to 90 per cent of the
estimated $20 billion art-finance market.
The recent Art Basel and UBS report on the total art market
gives a global figure of $67 billion, which may be small
compared with equities or bonds but is not exactly chump
change.
The Athena sale then may not be a great story for its founders in
terms of how much money was made, but in capitalism, even real or
perceived setbacks yield knowledge about what’s possible. What
appears certain is that the art investment market isn’t done with
innovation.