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Transcript of 2013 03 Art Finance Report Web
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Art & Finance Report 2013.
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Foreword 9
Introduction 10
Key fndings 12
Priorities 16
Section 1: The art market 18
- Interview: An auction house view on the art market 29
Section 2: Art and wealth management survey 30
- General motivation and perceptions among wealth managers, art proessionals
and collectors 34
- Article: An overview o recent developments in the global art secured lending market 40
Section 3: Art as an investment 46- Article: Art and collectibles unds one o the greatest benefciaries o the Alternative
Investment Fund Managers Directive (AIFMD)? 52
Section 4: Growth o the online art industry 54
- Interview: Views on the uture o the online art industry 59
Section 5: Art & Finance analytical tools 60
- Article: Art market indexes 61
- Article: Market and liquidity risk measurement tools 65
- Article: Market sentiment tools 67
Section 6: Education 69
- Article: Annual art market symposium 70
Section 7: The Polish art market profle 75
Table o contents
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Art & Finance Report 2013 9
Foreword
Deloitte Luxembourg and ArtTactic are pleased to present the 2nd edition
o the Art & Finance Report 2013.
The rst issue o our Art & Finance Report was exceptionally well received
by the international media. Our primary expectation o the rst issue was to
raise awareness o what is happening in the Art & Finance industry. The rst
issue also enabled us to establish partnerships with other oces in the global
Deloitte network, and we are delighted that Deloitte Poland and Deloitte
Spain have joined this initiative.
While the rst report was about establishing a better understanding o the
boundaries o the Art & Finance industry and the concerns and motivations
o its stakeholders, this years report is more about the industrys evolution
in the last 14 months. With a set o comparative data, we are better placed
to understand where the market could be heading and why. Although 14
months is not a long period, there have been some noteworthy changes
in both the attitudes and actions among the wealth managers, collectors
and art proessionals surveyed or this report. We hope the ndings o this
report will create debate, raise awareness and encourage more Art & Finance
stakeholders to participate in the discussions that will ultimately set the
direction or this emerging industry and shape its uture.
Once again, we would like to express our most sincere thanks to all the
individuals and institutions that contributed to this report. Without their
support, this report would not have been possible. Anders Petterson
Managing Director
ArtTactic
London
Adriano Picinati di Torcello
Directeur
Advisory & Consulting
Deloitte Luxembourg
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I there is one key word we could take away rom this
report, it must be convergence. What emerges rom
the report is a gradual convergence in the motivation
and interests o key stakeholders in the art market and
wealth management community as regards art as an
asset class, and this trend is driven by the client.
The survey o wealth managers shows that industry
competition is no longer the main motivation or
including art in a traditional wealth management
context; in act the key driver is client demand. With
clients sitting on an estimated US$4 trillion1
o treasureassets2, the private wealth management community has
good reason to take notice.
One o the main actors increasing client demand is
the current economic uncertainty, which has created
a stronger investor appetite or real assets that have
a low correlation with traditional investments such as
equities and bonds. Moreover, against a backdrop o
urther quantitative easing and the risk o infationary
pressures, art and collectibles are increasingly viewed
as a diversication tool by High Net Worth Individuals
(HNWIs).
The ocus has clearly shited rom looking at the
returns that can be made on art to the role o art as a
diversication and capital protection tool. However, the
emotional return remains the key driver or art buyers
and investors, and needs to be embedded in the wealth
management approach to art. The client-driven trend
towards services that protect, maintain and enhance
the value o art assets will orce a more holistic and
integrated approach to art in the context o wealth
management.
One o the key challenges or the uture is the required
shit in the current wealth management approach
rom looking at art as a soter service (mostly client
entertainment) towards developing a set o wealth
management products around the art asset itsel.
Methodology and limitations
Deloitte Luxembourg and ArtTactic conducted the
research or this report between June and November
2012. We surveyed 30 private banks predominantly
in Luxembourg, but also in Spain and Poland, which
enabled us to give a wider perspective o perceptionsin the European wealth management community. Our
aim was to establish the perceptions and motivations
related to art as an asset class, as well as the current
involvement with art and uture expectations. At the
same time, we conducted a similar survey among 112
art proessionals (galleries, auction houses and art
advisors) and 81 important art collectors (up rom
48 in 2011) worldwide to establish whether the issues
and concerns in the art market were o a similar nature
to those experienced in the wealth management
community. Due to the broadening o the sample o
private banks rom 18 in 2011 to 30 in 2012, whichincluded additional banks rom Poland and Spain, some
regional variations in the ndings were to be expected.
We have highlighted these regional dierences where
we elt they had an impact on the interpretation o the
overall ndings.
Introduction
1 Estimated igure using data rom Barclays Wealth Insights and the World Wealth Report 2012 rom Capgemini and RBC Wealth Management
2 Includes ine art, s tamps and coins, wine, classi c cars, prec ious metals, j eweller y. Source: Barclays Wealth Insigh ts
It is only 14 months since we launched the inauguralArt & Finance Report, and in this short space o timewe have seen signifcant shits in perceptions o the roleo art in fnance, as well as the role o fnance in art.
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Art & Finance Report 2013 11
This year we also launched the Deloitte ArtTactic Art
& Finance Condence Indicator, an annual barometer
or wealth manager sentiment towards art as an
investment, art secured lending and the general
economic environment in the next 12 months. We
hope this condence measure will give an insight into
how wealth managers see the immediate uture, and
together with the other survey ndings, help us to
better understand the opportunities and challenges
acing the evolution o the Art & Finance industry.
To provide a market context to survey ndings we
have given a broad, international overview o recent
developments across various regional modern and
contemporary art collecting categories. Most o the
data is collected rom Sothebys and Christies, as
these rms represent a substantial share o the auction
market, although certain regional markets such as
China, India and Russia also include domestic auction
data.
We have estimated the size o the global art undindustry, combining data and inormation rom
interviews with U.S. and European art unds, as well as
public records on art investment trusts and art unds
in China. We are also delighted to be able to publish
interviews and opinions rom key gures in the Art &
Finance industry: Pierre Valentin, Partner at Constantine
Cannon, on the subject o European art lending; Sergey
Skaterschikov, Founder Skates Art Market Research o
Next Edition Partners on the uture o the online art
industry; Guillaume Cerutti, Prsident Directeur Gnral
o Sothebys France on the current state o the art
market; Christopher Stuart Sinclair, Director at Deloitte
Tax & Consulting in Luxembourg on the Alternative
Investment Fund Managers Directive; Pro. Rachel
Pownall rom Maastricht and Tilburg University on
art market indices and the art market symposium and
Fabian Bocart, Founder o Tutela Capital on market and
liquidity risk measurement tools.
Deloitte Luxembourg and ArtTactic recognise that the
ndings are indicative and recognise the limitations o
these ndings; however, we believe that the results
refect a broad representation o the perceptions and
attitudes that exist in the global wealth management
and art community.
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Art market
The global art market continued its expansionin 2012, increasing the ocus on art as an asset
class and the need or new types o proessional
Art & Finance services
Increasing confdence in the art market: recent
surveys show an increase in market condence
across most global art markets, signalling the
potential or additional growth in 2013, and
supporting urther development o the Art &
Finance industry
Post-war and contemporary art set new
records in 2012, as wealthy buyers gravitated
towards the top 20 blue-chip contemporary artists,accounting or 77% o contemporary art sales in
2012. Post-war and contemporary art is now the
most important sales generator or Christies and
Sothebys
Chinese art market sales declined in 2012,
but a rebound is likely this year: auction sales
o Chinese art in Hong Kong and mainland China
dropped by 43% between November 2011 and
November 2012. However, recent polls suggest
experts3 believe the market could start to recover
in 2013
Latin America will remain the growth region
in 2013: with growth o 25% in auction sales in
2012, and 67% o art buyers expecting the Latin
American art market to expand in 2013, the region
is set or a year o strong growth4
Art and wealth management
Economic uncertainty is increasing clientdemand or alternative investments: 53%
o wealth managers stated that the challenging
economic environment is the main motivation
or their clients to include art in their overall
wealth portolio (up rom 28% in 2011). A large
majority (60%) o wealth managers believe that
we will see stronger demand in the uture or art
and collectible assets, as a result o the current
economic uncertainty in Europe and in the world
The increasing value o art is creating a need
or new wealth management services: 43%
o wealth managers said that the increasing valueo art is creating a need or banking services to
protect, enhance or monetise this value
The role o art in wealth management is
changing: the role o art services in wealth
management is shiting rom client entertainment
to art wealth management services, with only 27%
o wealth managers seeing client entertainment as
a primary motivation in the uture (down rom 61%
in 2011)
Client demand is opening up opportunities or
closer collaboration between wealth managers
and art proessionals: wealth managers shouldconsider integrating art into their service oering
to meet clients needs, and to work closely with art
proessionals who are increasingly being asked to
provide collector services that ocus on the nancial
aspects o transacting and owning art
Key fndings
3 Source: ArtTactic poll o 514 art collectors and ar t proessionals
4 Source: ArtTactic Outlook 2013, published in January 2013
The role o art in wealth management is changing
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Art & Finance Report 2013 13
Portolio diversifcation is more important
than investment returns or wealth managers,
collectors and art proessionals: 43% o wealth
managers stated that port olio diversication was
one o the strongest arguments or including art
and collectibles in traditional wealth management.
This was echoed by 59% o art proessionals
who said their clients were motivated by the
opportunities or portolio diversication. A urther
44% o collectors surveyed said that port olio
diversication was a primary motivation or
investing in art at the moment. As a consequence,
reporting tools that include nancial and non-
nancial assets will be required to monitor the
diversication benets
Private banks will increase their ocus on art
and philanthropy in the next two to three
years: this is clearly a growing area o interest
or wealth managers. 33% o banks expect to
increase their ocus in this area in the next two to
three years. With signicant sums5 involved in the
intergenerational transer o wealth (nancial and
non-nancial assets) that is taking place, wealth
managers will increasingly have to oer advice
regarding art legacies and the most eective way
o preserving their emotional, nancial and cultural
value
A new Freeport in Luxembourg could be a
major attraction or the wealth management
and art investment und industry: a new
Freeport specialising in the storage o valuables is
scheduled to open in the third quarter o 2014, and
is likely to become a major draw or bringing art
and collectible assets to Luxembourg
Education is essential to the evolution o the
Art & Finance industry: 40% o banks currently
oer art and nance education to their clients and
urther 23% expect to oer these services in the
next two to three years
Collectors see opportunities to use their
art collection as collateral or loans: 41% o
collectors state that they would use their collection
or this purpose. When asked their motivation or
using art as collateral, 36% o collectors would use
it to invest in other business activities, 39% to buy
more works o art and 18% to renance other loans
U.S. art lenders are moving into Europe:
traditional art lenders such as Emigrant BankFine Art Finance oers art nance in Europe,
strengthening its presence in the increasingly
attractive European market
Increasing demand or short-term art loans:
short-term money lenders are eyeing new
opportunities in the art market; or example, the
recently launched Borro has quickly expanded its
business in the U.S. and UK
5 Source: Accenture. Over US$12 trillio n in nancia l and non-nancial assets is changing hands, moving rom the Greatest Generationthose born in the 1920s and 1930sto the baby boomers, born between 1946 and 1964
A new Freeport in Luxembourg could be a major attractionor the wealth management and art investment und industry
The increasing value o art andthe economic uncertainty arecreating a need or new wealthmanagement services
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Art as an investment
The art market oers diversifcation
opportunities despite underperorming equities
in 2012: the worldwide art auction prices declined
3.28% in 2012 according to the Mei Moses
World All Art Index.6 Despite underperorming
the S&P index, art continues to oer signicant
diversication benets to investors due to its lowcorrelation, or example, with the equity market
The global art investment und market
increased by 69% in 2012 driven by Chinese
demand or art investments but it is still a
nascent market: the global art investment und
market reached a conservative estimate o US$1.62
billion in 2012, up rom US$960 million in 2011,
driven by growth in art investment unds and trusts
in China
Existing art unds raise more money: although
a number o new art unds started their und
raising in 2012, it is the existing art unds such asthe Fine Art Fund (UK) and the Art Collectors Fund
(U.S.) that have been successul in attracting new
investors to their unds
Chinas demand or art investment continues
to grow, albeit at a slower pace: the art und
and art investment trust market in China raised
an estimated US$367 million in 2012, down rom
US$506 million in 2011
Early signs o increasing industry acceptance
o art investment unds: while none o the
banks surveyed in 2011 were looking at adding art
investment unds to their investment platorm in the
next two to three years, the latest survey suggests
that 18% believe it is likely or very likely that they will
include art investment unds as part o their banks
product platorm in the next two years
The end o the frst wave o art exchanges: ater
China saw a boom in art and cultural exchanges in
2010 and 2011, the government moved in to stop
uture development o these initiatives. Trading
irregularities and manipulation were cited as the
main reasons or this move. European initiatives
in Luxembourg and Paris ailed to materialise,
although the Paris exchange is currently in the
process o a relaunch
Online art industry
Rapid development in the global online art
industry: we have seen an acceleration in the
number o online art businesses coming to the
market, with more than 300 online art ventures
launched in recent years
The Art & Finance industry is set to beneft
rom greater transparency, liquidity and
reduction in transaction costs: new online
transaction platorms add liquidity to the art
market and will broaden the scope and depth
o art market data available, which in turn will
improve transparency and acilitate more accurate
art valuations
Online education is set to play an increasingly
important role in building confdence in the art
market: 67% o art collectors said online education
and inormation will be crucial to the development
o the Art & Finance industry
More confdence in online auctions than online
galleries: 80% o collectors believe that online
auctions will succeed, compared with 54% o
collectors who have similar aith in online galleries
Building trust will remain critical to online
businesses: collectors and art proessionals have
more aith in dealer-to-dealer platorms than
consumer-to-consumer platorms (59% and 46%
vs. 32% and 29% respectively), which highlights
the importance o building trust online, as well
as issues around guaranteeing provenance and
authenticity
The global art investment undmarket increased by 69% in2012 driven by Chinese demandor art investments but it is stilla nascent market
6 Source: Jianping Mei & Michael Moses, Insights On Art Market Financial Perormance Through 2012Based On The Mei Moses Family O World Art Indexes, published i n January 2013
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Art & Finance Report 2013 15
Analytical tools
Improved technology and online index
providers give users access to almost immediate
inormation on changes in indices, as well as tailor-
made sector or specic artist indices. Although art
index tools are still in development, indices can
be used to evaluate the trading perormance o
art und managers, and or insurance companiesto better assess the value o their clients art
collections
Managing market and liquidity risks: new tools
and methodologies are currently being developed
to measure market and liquidity risk more
eectively
Market sentiment analysis will play an
important role: as we have seen in the nancial
markets, sentiment-based data analysis and
indicators are playing an increasingly important
role or traders and investors in reading the uture
direction and risks o the market
Education
Education will uel development in art and
fnance activities: a lack o knowledge is oten
cited as a reason or resistance to art as an asset
class; however a number o recent education
initiatives is likely to change this. The last two years
have seen a signicant increase in the number
o seminars, conerences and university coursesrelated to art as an asset class and other Art
& Finance topics
Academics are at the oreront o the
development o the Art & Finance industry:
the number o academics who have written on
art market perormance and other art market-
related issues has risen in recent years. Increasing
collaboration between practitioners and academics
will be pivotal to the development o the Art &
Finance industry
The Annual Art Market Symposium organised
by Pro. Rachel Pownall rom MaastrichtUniversity is a unique initiative where international
academics meet to present and discuss their latest
papers and ndings on a large number o art
market themes
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1. Building closer relationships between art
proessionals in the art market and the
wealth management community: one o the key
ndings o this report is the increasing convergence
o interests and motivation among collectors, art
proessionals and wealth managers when it comes
to the nancial aspects associated with transacting
and owning art. The previous resistance to art as an
asset class is gradually diminishing, with an entirely
new dialogue opening up between the dierent
stakeholders in the market. It is evident rom the
recent survey ndings that the Art & Finance industry
has to develop as a mutually benecial partnership
between the art and nance sectors. This partnershiprequires a strong element o trust and understanding
o each others businesses and modus operandi,
supported by clear guidelines around the rules
o engagement
2. Increasing the ocus on risk management:
the risks in the art market have increased
exponentially with its growth. Aside rom
signicantly higher values, which have orced a
rethink o how we look at risks in the art market,
globalisation means that art is now transacted,
traded, moved, stored and exhibited worldwide,
raising important questions on insurance, tax,
economic and nancial risksall in the context o anunregulated market. The ne art insurance industry is
already eeling the pressure o the explosive growth
in the art market. It is particularly the concentration
o value in many o the current reeports that have
highlighted the need or new storage acilities, as the
value o art in storage has grown aster than insurers
capacity to cover it. The ability to monitor insurance
risk more eectively is a topic we will discuss in more
detail in next years edition o the report. Apart rom
this, the challenge around the authenticity o art will
intensiy as new and less developed art markets
where the inrastructure and knowledge to supportthem are still in their inancycontinue to grow.
It is essential that the wealth management sector
supports and works closely with trusted partners
in the art industry to build a common ramework
to better understand art-related risks in this global
context. The call or a global art certication system
that tracks and veries the ownership and movement
o art might seem too ambitious, but unless steps
begin to be taken in this direction, the art market
and the Art & Finance industry could become
exposed to risks with the potential to undermine
their uture growth and development
Priorities
Building closer relationships between art proessionals inthe art market and the wealth management community
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Art & Finance Report 2013 17
3. Improving tools: issues around valuation, risk
and returns remain key obstacles to a well-oiled
relationship between art and nance. It is paramount
that the data, research and analytics providers in
the art market raise their game when it comes to
improving the understanding o value, risk and
returns when considering art as an asset class. More
academic research and increasing collaboration with
practitioners will improve the understanding o how
the art market unctions, and more data and better
technologies will acilitate the rapid processing o
analytics and reporting, which in turn increases
transparency. It is also important that the tools and
methodologies adopted gain widespread recognition
and acceptance among stakeholders in order or
users to nd them credible
4. Embracing new technologies: technology is
one o the key drivers or change in the art market,
and presents the art industry with a new set o
challenges and opportunities. Traditional art businessmodels will have to adapt to this environment,
as new players are already making rapid inroads
into existing and virgin art market territory. With
increasing amounts o data, inormation and
research available online, and with new online
transaction platorms opening up dierent segments
o the art market, oten at a lower cost, we are
potentially on the cusp o a seismic shit in the way
most people learn about, transact, engage and
experience art. In this rapidly changing environment,
there is an opportunity or the Art & Finance industry
and digital players to develop a closer relationshipand to share how these new ventures could tackle
the current impediments to art as an asset class and
art in a wealth management context
5. Opportunity or regulated art security
exchange: despite the challenges aced by the
rst wave o art security exchanges in Europe and
China, the rationale and demand or regulated artinvestment markets remain. It seems there is room
or a regulated art investment market to co-exist
alongside the traditional art market. To make
these exchanges credible to potential investors
and also to the art market, it is essential that these
exchanges are set up within a regulatory ramework,
so that they do not become unregulated casino-
like exchanges o the kind we saw in some parts
o the world. The impact o regulated exchanges
on transparency, liquidity, costs and valuation will
change the way we look at as an asset class and art
investment in the uture
Opportunity or regulated art security exchange:the rationale and demand or regulated art investmentmarkets remain
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Highlights
The growth o the global art market and the
increase in value is driving an increasing interest
in art as an asset class and new developments in
the Art & Finance industry
Global art auction sales have risen as HNWIs7
appetite or art increases: overall auction sales
at Sothebys and Christies o Chinese art, Old
Masters, Impressionist & Modern and Post-War
& Contemporary art saw a 5.9% increase last year,rom US$6.27 billion in 2011 to US$6.64 billion
in 2012
Chinese art market sales are in decline: China
became the largest art market in the world in
2011, accounting or 30% o global art sales
(dealer and auction) by value8; however auction
sales o Chinese art in Hong Kong and mainland
China dropped by 43% between November 2011
and November 2012. On the other hand, experts9
believe the Chinese art market could rebound
in 2013, which is likely to calm the nerves o the
countrys burgeoning art investment industry
The Old Master market revived in 2012, with its
best year since 2007. Christies and Sothebys Old
Master sales were up 57%, rom US$313 million in
2011 to US$490 million in 2012
Contemporary art sales increased by 34% rom
US$2.1 billion in 2011 to US$2.7 billion in 2012,
contributing the largest dollar increase to the
overall total or Christies and Sothebys combined
Indias art market is emerging rom the gloom:
the Indian auction market was down 11% overallon 2011. However, the negative trend in place since
June 2010 was reversed in the second part o 2012,
as gures or September were 33% higher than
the previous period.10 With the outlook turning
increasingly positive, the interest in art among the
countrys HNWI population is likely to grow11
Latin America remains the growth region in
2012: with growth in auction sales o 25% in
2012, and 67% o art buyers expecting the Latin
American art market to expand in 2013, the region
is set or a year o strong growth
Renewed interest in Russian sales in London:the Russian Modern and Contemporary art auction
market in London grew by 17.9% between 2011
and 2012, signalling renewed interest in this
collecting segment
Section 1: The art market
7 High net worth individuals (HNWI)
8 Source: The International Ar t Market in 2011 Observations on the Art Trade over 25 Years TEFAF, Maastricht, published in March 2012
9 Source: ArtTactic poll o 514 art collectors in January 2013
10 Source: ArtTactic Outlook 2013, published in January 2013
11 Source: ArtTactic Outlook 2013, published in January 2013
The growth o the global art market and the increasingvalue o art continue to drive the increasing interest in artas an asset class and represent one o the raison dtre othe Art & Finance industry
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Art & Finance Report 2013 19
Global art market overview and outlook
The growth o the global art market and the increasing
value o art continue to drive the increasing interest in
art as an asset class and represent one o the raison
dtre o the Art & Finance industry.
The marketplace has undergone radical change. While
the art market was previously dominated by buyers andartists rom the U.S. and Europe, the last 10-15 years
have seen the emergence o new art markets across the
world, bringing collectors, artists and art proessionals
together in a truly global market place. The advent o
art airs, biennials, auctions, new online ventures and
the rapid expansion in galleries and museums have led
the market to more than double in size since 2002.12
The purpose o this section is to give an overview o
the recent changes and expected developments in
some o the global art collecting categories. This is
not meant to be an exhaustive analysis o the global
art market, but rather an insight into collectors buying
trends and interests. We aim to do this by providing
some context to the survey ndings that we present in
the ollowing sections, such as why wealth managers,
art proessionals and collectors are increasingly looking
at nancial considerations related to transacting and
owning art.
Global auction sales13 reach new heights in 2012
Total auction sales at Sothebys and Christies in the
Chinese art, Old Masters, Impressionist & Modern,
and Contemporary categories grew by 5.9% in 2012
to US$6.64 billion, rom US$6.27 billion in 2011.
Worldwide Chinese art was the only category to
register a decline in Sothebys and Christies auction
sales in 2012, o 29%14, to US$1.53 billion rom US$2.15
billion in 2011.
The Impressionist & Modern market grew by 8.6% in
2012 to US$1.89 billion, rom US$1.74 billion in 2011,
while the Old Master market was up 56.5%, rom
US$313 million in 2011 to US$490 mill ion in 2012.
Contemporary art increased by 32.5%, rom US$2.06
billion in 2011 to US$2.73 billion in 2012, contributing
the largest dollar increase to the overall total.
Until 2007, the Impressionist & Modern category was
the most important revenue generator or Christies
and Sothebys. However, in the last two years the
Contemporary market has accounted or the lions share
o auction turnover. This is partly driven by new buyers
with a taste or modern and contemporary art and with
the ambition o building up a signicant art collection in
a short space o time. Few o the other more traditional
collecting categories (Old Master and Impressionist)can provide the quality o supply to satisy market
demand, mainly as many o the best works are owned
by museums, while the supply is nitesince the artists
are no longer alive.
12 TEFAF Report 2012: Global art sales grew rom 22.2 million to 46.1 million
13 Based on Sothebys and Christies Old Master, Impressionist & Modern, Chinese, and Post-War & Contemporary sales worldwide. These sales areconcentrated at the high end o the art market, and the results do not necessarily refect the status and perormance o lower-priced segments
14 This gure reers to global sales o Chinese art at Sothebys and Christies only
$-
$1.000.000.000
$2.000.000.000
$3.000.000.000
$4.000.000.000
$5.000.000.000
$6.000.000.000
$7.000.000.000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Chinese art Old masters Impressionist and modern Contemporary
Source: ArtTactic
Figure 1. Christies and Sothebys auction sales by category 2000-2012
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Auction sales o Chinese art in Hong Kong and
mainland China ell by 43.6% between November
2011 and November 2012, putting Chinas leading
position in the art market under pressure
In 2011, the Chinese art market increased its global
presence, overtaking the U.S. market as the worlds
largest in terms o the art trade15 as a whole, with sales
o 9.7 billion or a 42% share16
. However, with slowingeconomic growth in China, coupled with a 43.6%17
drop in auction sales between November 2011 and
November 2012, it is questionable whether China will
retain its leading position, unless this negative trend is
reversed.
In autumn 2012, total auction sales o Chinese art (all
categories) declined by 43.6%, rom US$2.2 billion in
autumn 2011 to US$1.24 billion, based on the results
rom the our biggest auction houses (Sothebys Hong
Kong, Christies Hong Kong, China Guardian and Poly
Auction). This was 52% lower than the peak o the
Chinese art market in May 2011. Market experts eel
that the intervention by the Chinese government in
2012, ollowing allegations o tax avoidance with regard
to art imports into mainland China, has made the market
nervous and kept buyers away rom the auction rooms.
O the our leading auction houses, China Guardian
suered the largest all, with overall sales down 55%
on autumn 2011. Despite a drop o 53%, Poly Auction
still managed to claim the top position with total sales
o US$370 million, 13% higher than Christies Hong
Kong, which came in second, and 39% higher than
Sothebys Hong Kong.18
Even though the overall Chinese market is cooling,
a new trend is emerging. Until now, the line between
the international and the domestic auction market was
clearly dened, mostly due to Beijings protectionist
policies. However, with Gehua19, the cultural
development group, setting up a new reeport in Beijing
and joining orces with Sothebys, this could signal a
possible sotening in the governments position towards
oreign intervention in Chinas domestic art market.
At the same time, Poly and Guardian are venturing out
o their domestic market, with regular sales scheduled
or this autumn in Hong Kong. The crossover between
the international Chinese art market in Hong Kong
and the domestic market in mainland China is likely to
trigger a new battle between the two domestic auction
houses (Poly and Guardian) and their two international
rivals (Sothebys and Christies).
The global market or modern and contemporary art
has seen dramatic and unprecedented growth since
2000. Although most o the gures in this section relate
to the auction market, it is important to bear in mind
that this only represents part o the overall market.The expansion o the global auction market could not
have happened without a simultaneous expansion in
the global art inrastructure, such as the increase in
galleries, art airs, biennials, exhibitions and museums
around the world.
15 The International Art Market 2011 Observations on the Art Trade over 25 Years TEFAF, Maastricht, published in March 2012
16 The International Art Market 2011 Observations on the Art Trade over 25 Years TEFAF, Maastricht, published in March 2012
17 ArtTactic Art Market Outlook July 2012
18 Source: ArtTactic Outlook 2013
19 A state-owned cultural industrial group. Beijing Gehua Cultural Development Group was ounded in December 1997
0%
20%
40%
60%
80%
100%
$-
$500.000.000,00
$1.000.000.000,00
$1.500.000.000,00
$2.000.000.000,00
$2.500.000.000,00
$3.000.000.000,00
Mainland(Poly and Guardian)
2008
sprin
g
2008
autum
n
2009
sprin
g
2009
autum
n
2010
sprin
g
2010
autum
n
2011
sprin
g
2011
autum
n
2012
sprin
g
2012
autum
n
Hong Kong(Sotheby's and Christie's)
Mainland auction proportion
Source: ArtTactic
Figure 2. Chinese art auction sales: Hong Kong (Christies, Sothebys)
vs. mainland China (Poly, China Guardian)
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Art & Finance Report 2013 21
Table 1. Regional market trends in modern and contemporary art and 2013 outlook
Geographical
market
Auction sales trend
2011-2012
Confdence trend
2011-2012
Collector outlook
201320
Global trend Although there are signicant
regional dierences, global sales
o modern and contemporary
art were up in 2012, mainlydriven by the increase in U.S.
and European auction sales at
the high end o the market
Economic uncertainty remains
a concern or the art market,
but buyers continue to be
positive towards the highend o the market (artworks
valued above US$1 million)
o the market
Unless a major political or negative
economic event occurs in 2013, the
market is set to continue the trend o
2012, supported by continued interestrom new markets in Latin America,
Asia and the Middle East
U.S. and European
contemporary21+32.5% +16% Record sales in New York in November
2012 have boosted condence in the
market
Collector poll:market direction
UP: 36%
FLAT: 47%
DOWN: 17%
Chinese
contemporary
-54% Hong Kong
-40% mainland China
-39% Ater a dicult year, the majority
o collectors believe the market
correction is losing
momentum, and that the market
could rebound in 2013
Collector poll: market direction
UP: 43%
FLAT: 35%
DOWN: 22%
Middle East modern
and contemporary
-36% -3% Ater ewer auction sales in 2012, and
a general lack o record sales, 2013
will be a better year as Sothebys re-
instates its modern and contemporary
Arab and Iranian sale in AprilCollector poll: market direction
UP: 52%
FLAT: 43%
DOWN: 5%
20 ArtTacti c Poll o 514 art collectors in January 201321 Same as Post-War & Contemporary. In a wes tern auct ion context , modern ar t belongs to the Impressionis t & Modern auc tion categor y, and is thereore not i ncluded
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22
Geographical
market
Auction sales trend
2011-2012
Confdence trend
2011-2012
Collector outlook
201320
Indian modern
and contemporary
-19% +8% The lack o quality works eatured
in Indian auction sales undermined
market condence in 2012. However,
the Sothebys decision to hold ewer
sales in 2013, but ocus on higher
quality works could prove positive
or the market
Collector poll: market direction
UP: 22%
FLAT: 63%
DOWN: 15%
Latin American
modern andcontemporary
+25% +2% Global interest in Latin American art
is set to continue in 2013, as majorinternational collectors and galleries
ocus on the region
Collector poll: market direction
UP: 59%
FLAT: 33%
DOWN: 8%
Russian modern
and contemporary
+17.9% -11% The market or Russian
contemporary art continues to
struggle as the domestic Russian
art market remains weak. However,
a renewed international ocus on
Russian contemporary art could instilsome much needed condence in
this market
Collector poll: market direction
UP: 29%
FLAT: 54%
DOWN: 17%
Source: ArtTactic outlook repor t 2013
In the overview that ollows we have ocused primarily on the
modern and contemporary segments22 o the art market, as we
believe that new trends and directions emerging in these collecting
categories are representative o many o the overall collecting
trends in the global art market. We have also added some o the
art inrastructure trends that we believe support the interest in and
demand or these collecting segments.
The ollowing overview covers some o the recent auction buying
trends across dierent regional modern and contemporary
collecting categories.
20 ArtTactic Po ll o 514 art collec tors in January 2013
22 Although modern and contemporary will be used as categories to descri be die rent geographica l art markets around the world, the deinit iono modern art and contemporary art will vary rom one market to another. The analytics presented in this report draw on the auction categoriesdeined by the sales o Christies and Sothebys
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Art & Finance Report 2013 23
U.S. and European sales o post-war and contemporary
art increased rom US$268 million in 2000 to US$2.73
billion23 in 2012 (see gure 3). The year-on-year increase
o 32.5% to US$2.73 billion in 2012, rom US$2.06
billion in 2011, resulted in the highest combined
contemporary total or the two auction houses.
The apparent resilience o the high end o art market
(prices above US$1 million) to the global economic crisis
is increasingly drawing the attention o HNWIs looking
or diversication and cultural trophies. New Yorks
post-war & contemporary sales in November 2012
surpassed the levels rom the previous boom in 2008,
propelled by the very high end o the art market.
Works valued above US$1 million accounted or 88%
o the evening sales o contemporary art in 2012. The
top 20 artists at the contemporary evening sales o
Sothebys, Christies and Philips accounted or 77%
o total sales in 2012.
The latest poll results show that 47% o art market
experts believe the market will remain stable in 2013,
while 36% expect growth. This signals a healthy and
robust outlook or the U.S. and European contemporary
art markets in 2013.
Recent art inrastructure trends
London and Paris are the new hubs or
international galleries: as a result o several major
galleries (Werner Gallery, David Zwirner, PACE,
Gagosian) expanding into London and Paris, we expect
both cities to increase their importance as cultural and
commercial hubs or Russian, Middle Eastern and Asian
art buyers.
Art air competition is hotting up: ater Art HK was
acquired by Art Basel in May 2011, competition in
the art air market has been hotting up. The London-
based Frieze Art Fair launched a new air in New
York in March 2012, and a new air in London called
Frieze Masters, which coincided with its original air inOctober 2012. The previous owners o the Art HK air
have reinvested in three new airs: India Art Fair in Delhi
(February 2013), and ART13 (London in March 2013),
as well as a new contemporary art air in Istanbul in
September 2013. The Armory Show has been acquired
by Louise Blouin, the publisher o Artino, and changes
are also likely to occur on the New York art air scene.
U.S. and Europe
Post-war and contemporary art by U.S. and Europeanartists has reached new heights on the back o a surge indemand or blue-chip artists such as Andy Warhol, MarkRothko, Roy Lichtenstein, Jean-Michel Basquiat and
Gerhard Richter.
$-
$500.000.000
$1.000.000.000
$1.500.000.000
$2.000.000.000
$2.500.000.000
$3.000.000.000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Post-war and contemporary auction sales
Source: ArtTactic
Figure 3. The U.S. and European post-war and contemporary art market
(by auction sales US$) - Sothebys/Christies
23 ArtTactic e stimate based on the low es timate or post-war & contemporary sa les in New York in November 2011
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24
China
As the market matures, buyers are becoming increasinglyselective and value conscious, which is taking the roth othe more speculative segments o the Chinese art market.
Sales o Chinese contemporary art24 also experienced a
slowdown in the last 12 months, with total sales alling
54% in Hong Kong (Sothebys and Christies) and 40%
in mainland China (Poly and China Guardian).25
As the market matures, buyers are becoming
increasingly selective and value conscious, which is
taking the roth o the more speculative segments
o the Chinese art market. The next 12 months will be
crucial or the sales o Chinese contemporary art as
this will tell us more about how boom-time buyers and
investors are coming to terms with a slowing market.
Despite the sharp slowdown, a recent poll26 among
international art collectors suggests that 43% expect
the market to rebound in 2013, the second highest result
ater Latin America (59%). A market rebound in China in
2013 would reduce the current risk o speculative buyers
being orced to sell in a weakening market.27
Recent art inrastructure trends
Private museum boom in China: a number
o private museums28 has been set up recently,
or example, collector couple Liu Yiqian and
Wang Wei launched their Long Art Museum in
Pudong, Shanghai in December, which exhibits
their masterpiece collections rom ancient to
contemporary. The museum covers an area o10,000 square metres. Another venture, the Long
Contemporary Art Museum in Xuhui, is scheduled
or launch in Shanghai in late 2013. Indonesian
collector Budi Tek is also set to open a museum
in 2013, in Shanghai
Auctions: the second-tier auction house Council
(Beijing) has acquired Shanghai-based auction
house Hengli. This acquisition will help Council
challenge the rst tier auction houses
The Art Newspaper will launch a Chinese version
in 2013
0%
20%
40%
60%
80%
100%
$-
$20.000.000
$40.000.000
$60.000.000
$80.000.000
$100.000.000
$120.000.000
$140.000.000
$160.000.000
$180.000.000
Mainland China(Poly and China Guardian)
Hong Kong(Sotheby's, Christie's)
Mainland China % of the total
2009
sprin
g
2009
autum
n
2010
sprin
g
2010
autum
n
2011
sprin
g
2011
autum
n
2012
sprin
g
2012
autum
n
Source: ArtTactic
Figure 4. Chinese contemporary art sales: sales o Chinese contemporary
art in Hong Kong and mainland China
24 Although Chinese contemporary art is sold globally, Hong Kong and Beijing have become the main auction market centres o r Chinesecontemporary art since 2005
25 Source: ArtTactic Outlook 2013
26 ArtTacti c Poll among 514 art col lector s conducted in January 2013
27 ArtTacti c Chinese Ar t Market Con idence Survey November 2012
28 395 new museums were bui lt in 2011, mostly devoted to history, al though more ar t museusm are planned or the u ture.Source: New York Times article 23. April 2012
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Art & Finance Report 2013 25
The sale o Middle Eastern modern and contemporary
art has been declining since 2010, largely becauseo lower sales in the Modern art segment, with
consignments o rare, high-quality works in short
supply. Auction sales o modern art have allen rom
US$24.6 million in 2010, to just above US$5.2 million in
2012.29 Total auction sales were aected by Sothebys
decision to postpone their modern and contemporary
Arab and Iranian autumn London sale in 2012 to spring
2013. This year Sothebys will organize a new sale in
Doha o Contemporary Art (16 April 2013), which will
include Western contemporary as well as contemporary
Arab, Iranian and Turkish art. Bonhams have stopped
their sales in Dubai, and are instead basing these salesin London. Christies continues to be the dominant
player in this market, with the highest visibility in
the region.
In October 2012, Christies autumn sales o modern
and contemporary Arab, Iranian and Turkish Art in
Dubai raised a total o US$4,800,600, down on the
spring 2012 and autumn 2011 sales30 (by 8% and 47%
respectively)but well within the pre-sale estimate o
between US$4,299,000 and US$5,950,000
Despite the negative trend in recent years, 52% o
international collectors polled by ArtTactic in January
2013 said they believe the market will go up in the next
six months, versus 5% who think it may all urther.
With Christies and Sothebys continued commitment to
the region, and art airs such as Art Dubai and Art Abu
Dhabi supporting the primary market, we could start to
see condence creeping back into this market in 2013.
Recent art inrastructure trends
New museum inrastructure: in 2010, the
Matha: Arab Museum o Modern Art in Doha,
Qatar opened its doors to the public. The 5,500
square-metre museum is located in a ormer
school building in Dohas Education City and has a
collection o more than 6,000 artworks that oers
a rare and comprehensive overview o modern
Arab art, representing the major trends and sites
o production spanning the 1840s through the
present. The collection was donated by Sheikh
Hassan bin Mohamed bin Ali Al Thani to the Qatar
Foundation, and was later acquired by the Qatar
Museums Authority
Saadiyat Island: ater the project was postponed,
the development o the museum island in Abu
Dhabi is reportedly going ahead, with completion
dates set in stages o 2015 (Louvre), 2016 (National
Museum) and 2017 (Guggenheim Museum)
Middle East
Two years o declining sales o Middle Eastern modernand contemporary art could come to an end as expertsturn positive on the market in 2013.
2009
sprin
g
2006
autum
n
2007
sprin
g
2007
autum
n
2008
autum
n
2008
sprin
g
2009
autum
n
2010
sprin
g
2010
autum
n
2011
sprin
g
2011
autum
n
2012
sprin
g
2012
autum
n0%
10%
20%
30%
40%
50%
60%
$-
$5.000.000,00
$10.000.000,00
$15.000.000,00
$20.000.000,00
$25.000.000,00
$30.000.000,00
Modern Contemporary Contemporary % of the total
Source: ArtTactic
Figure 5. Middle East modern and contemporary art market
(2006-2012) Christies, Sothebys and Bonhams
29 Source: Ar tTactic outlook 2013
30 Source: ArtTactic outlook 2013
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26
The overall ArtTactic Indian art market condence
indicator increased by 9.6% between May and
October 2012, and currently stands at 57 (up rom
52).31 The increased market condence comes on
the back o improved results rom the last round o
auctions or modern and contemporary Indian art in
September 2012. Overall auction sales or modern and
contemporary Indian art totalled US$11.4 million, which
represents a 33% increase rom June 2012, on a par
with the results 12 months ago.32 Ater six consecutive
seasons o decline, the Indian art market has shown
the rst signs o a possible turnaround; however, it is
too early to say this with certainty, as conrmation will
largely depend on the outcome o the auction seasonthis spring.
The Indian market remains conservative, and although
the last June season showed some encouraging signs
in the contemporary market segment, the last round
o auctions returned to the more established Modern
segment, with contemporary lots accounting or only
14% o the total number o lots and 5% o the total
value.
In a recently conducted poll, 22% o collectors
expected the market to go up in 2013, versus 15%
who think the market will all. The large majority, 63%,
believe the market will remain fat. Improving auction
sales would instil new condence in the market, and
again reinvigorate the interest in art among IndiasHNWI population.
Recent art inrastructure trends
India Art Fair: the India Art Fair launched its second
edition in February 2013 under new ownership. The
air has become a key event in the Indian art market
calendar, and has been an important counterweight to
the lack o condence in the auction market since 2010.
Indias frst biennale: the Kochi-Muziris Biennale is
an international exhibition o contemporary art being
held in Kochi, Kerala. It is a rst or India and runs romDecember 2012 to March 2013.
India
Sales o Indian art reverse a two-year negative trendwith improving auction results in 2012.
0%
10%
20%
30%
40%
50%
60%
$-
$5.000.000,00
$10.000.000,00
$15.000.000,00
$20.000.000,00
$25.000.000,00
$30.000.000,00
Mar
200
8
Jun20
08
Sep20
08
Mar
200
9
Jun20
09
Sep20
09
Mar
201
0
Jun20
10
Sep20
10
Mar
201
1
Jun20
11
Sep20
11
Mar
2012
Jun20
12
Sep20
12
Modern Contemporary Contemporary % of the total
Source: ArtTactic
31 Source: ArtTactic Indian Art Market Conidence Su rvey October 2012
32 Source: ArtTactic Outlook 2013
Figure 6. Indian modern and contemporary art market (2006-2012)
Christies, Sothebys and Saronart
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Art & Finance Report 2013 27
In November 2012, Latin American art auction sales at
Sothebys, Christies and Phillips raised a total o US$36.5
million, 12.1% below the low pre-sale estimates o
US$41.6 million. This result was fat compared with
November 2011, and ell 24% short o the auctions held
in May 2012. Despite the drop in sales in the second
hal o 2012, the total or the year was still the second
highest since the peak o the Sothebys and Christies
Latin American auction sales in 2008.
Modern Latin American art dominated the sales,
accounting or more than 90% o the total. While the
appetite or Latin American art has increased in recent
years among European, Asian and Middle Easternbuyers, the November 2012 sales saw the interest
shiting back to regional buyers, which is likely to be
a result o avourable economic conditions in markets
such as Chile, Brazil and Colombia. Looking ahead, this
is the region that most collectors expect to do well
in 2013, with 59% o respondents believing that this
market will go up in the next six months. Higher sales
and prices are likely to encourage HNWIs in the region
to start turning to art, not only as a collectible, but also
as an asset class.
Recent art inrastructure trends
Latin American art airs are gaining international
attention: several o the Latin American markets are
shaking o their regional reputation and have started
to attract attention rom the international art world.
In September 2012, collectors and sixty international
galleries focked to the second edition o the ArtRio art
air, attracting big names such as the Gagosian Gallery,
David Zwirner and White Cube. Other art airs in the
region, such as ArtBo (Bogota) and ArteBa (Buenos
Aires) have seen similar trends.
International galleries have established a presence
in Brazil: the increasing appetite or art among Brazils
wealthy has also led the Gagosian Gallery to open a
temporary space in Rio in September, and Londons
White Cube gallery is to open a new permanent
outpost in So Paulo.
Latin America
May
2006
Nov2
006
Nov2
007
May
2007
Nov2
008
May
2008
Nov2
009
May
2009
Nov2
010
May
2010
Nov2
011
May
2011
Nov2
012
May
2012
0%
2%
4%
6%
8%
$-
$10.000.000,00
$20.000.000,00
$30.000.000,00
$40.000.000,00
$50.000.000,00
$60.000.000,00
Modern Contemporary Contemporary % of the total
Source: ArtTactic
Figure 7. Latin American modern and contemporary art market
(2006-2012) Sothebys/Christies
Despite the market or Latin American art slowing downin the second hal o last year, 2012 marked the highesttotal since the market peak in 2008.
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28
The overall market or Russian art33 was relatively
stable in 2012, with auction sales alling by 8.4% rom
US$95.2 million in 2011 to US$87.2 million in 2012.
However, the sale o modern and contemporary
Russian art saw a more positive trend, with auction
sales increasing by 17.9% rom 28.4 million in 2011 to
33.5 million in 2012. While MacDougalls, the Russian
auction specialist, raised the highest total (9,285,500)
in terms o Russian modern and contemporary art in
May 2012, it was Christies who came out as the winner
in this category in December 2012, with a total o
9,127,500.
The Russian contemporary art segment is still small, and
accounts or around 10% o the total Russian modern
and contemporary art auction market. The Saatchi
Gallerys big exhibition on Russian contemporary art
that opened in November 2012 will contribute to this
shit, and maybe encourage Russian collectors who
currently buy international contemporary art to also
support their own artists. The positive auction sales
trend is likely to continue in 2013, with 29% o the
collectors surveyed believing the market will go up in
the rst hal o 2013, and 54% believing the Russian
modern and contemporary art market will remain fatat approximately the current level.
Recent art inrastructure trends
Art Vienna has established itsel as a new
platorm or Russian and Eastern European art:
the recent re-launch o Art Vienna is good news
or the Russian contemporary art market, which
has been negatively aected ater a number o
major Russian galleries closed down or moved out
o Russia
The Saatchi Gallery launched its frst exhibition
ocusing on Russian contemporary art in
December 2012, an important event or a market
that has been neglected in recent years
Russia
Modern and contemporary Russian art auction salesincreased by 17.9% between 2011 and 2012, signallinga renewed interest in this collecting segment.
0%
2%
4%
6%
8%
10%
12%
14%
16%
-
2.000.000
4.000.000
6.000.000
8.000.000
10.000.000
12.000.000
14.000.000
16.000.000
18.000.000
20.000.000
Jun 11 Nov 11 Jun 12 Nov 12
Modern Contemporary Contemporary % of the total
Source: ArtTactic
33 Based on sale s at MacDougall, Chris ties and Sothebys in London
Figure 8. The Russian 19 th, modern and contemporary art market
Sothebys, Christies and MacDougall
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Art & Finance Report 2013 29
An auction house view on the artmarket
Guillaume Cerruti
Prsident-Directeur Gnral
Sothebys France
Q: With Europe in the midst o an economic crisis,
how do you see the European art market evolving
over the next two to three years? What do you see
as the main opportunities and challenges?
The art market is such a specialist eld that predictions
are always extremely dicult i not impossible, so Iwon't hazard any guesses! Even so, we have seen some
strong trends in recent years, and we may suppose
they will continue or the oreseeable uture. First o
all, whereas the art market was long the monopoly o
European and American clients, it has now become
globalunder the dual eect o the emergence o new
generations o buyers rom Russia, Asia, the Gul States
and Latin America, and the ease with which inormation
now circulates in the internet era. This globalisation has
prooundly and durably transormed the market. The
principal actors o the art marketthe auction houses,
dealers and galleristshave adapted to this evolutionby adopting strategies to appeal to clients around the
world, and by diversiying the services they oer. This
is why private treaty sales and nancial services to
clients (like the possibility o obtaining an advance on
the collateral value o a work o art) have become an
increasing part o our activity at Sothebys.
Q: The value o art and collectibles has proved
resilient, despite the all in other traditional assets.
Do you see this trend continuing and, i so, why?
It is true that pointers or measuring the evolution o
the art market, notably the technique or measuring
results o repeated sales (like the Mei Moses Index),
show that, over the last decade, the art market has
held up rather better than the market or stocks and
shares. This evolution has encouraged the creation o
art investment undswhich are not new phenomena,
but had disappeared somewhat since the 1990s. We
should, however, temper this observation a little.
Results are not the same in every sector o the art
market: what is true or contemporary or modern art
is not conrmed by other sectors, such as traditional
urniture or books and manuscripts. Above all, the
many art market transactions concern unique works or
items with their own qualities and importance in thehistory o art or o the artist concerned, not orgetting
their provenance So it is very hard to talk o an
art market model as we can or traditional markets.
Art is not a 'commodity'!
Q: Recent surveys suggest that more and more
people view art not only as an emotionalinvestment, but increasingly as a fnancial asset.
What does this imply or the art market?
In an increasingly tough European economic context,
art has become a sort o 'reuge value'. Anyone with
sizeable liquid assets is interested in buying quality
works o art whose value will be preserved in the long
runand which also procure pleasure and emotion.
At the same time, wealth management advisors and
private bankers now tend to classiy works o art as
'assets', and have no hesitation in advising their clients
to move into this eld. This situation is interesting or
the art market, as it is clear that new types o buyersare emerging, and we need to welcome and guide
them. At the same time we also have a duty to explain
that acquiring a work o art should refect a desire and
aord pleasurerather than the belie it will lead to
nancial prot. This can never be certain, as it depends
on a range o actors to do with the unique character
o each work in its own right.
Q: In your view, how can amily ofces, wealth
managers and private bankers help their clients
manage their art collections (assets)? What kind
o services does Sotheby's oer in this respect?
Family oces, wealth managers and private bankers
have a crucial advisory role to play. In the highly specic
eld o works o art, the best advice they can give
their clients is to consult proessionals, galleries or
auction houses or advice about valuing their collection,
assessing a work or planning an acquisition. Sothebys
provides all these services.
Q: The Luxembourg Freeport or valuable assets
is planning to open in Q3 2013. Do you see any
opportunity here or Sotheby's?
We are keeping a close eye on this project that
is at the heart o Europe, and are in touch with its
promoters. It is still a bit too early to say anything more.
Interview
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Section 2: Art and wealthmanagement survey
34 Any reading below 50 implies that there is more negative than pos itive sentiment towards the develop ment o the Ar t & Finance indus try. Theoverall indicator is composed o the average o three sub-indicators: the economic indicator, art investment indicator and art lending indicator
35 From Barclays Wealth Insight s Repor t Proit or Pleasure?, volume 15. Treasure asse ts include: ine art , stamps and co ins, wine, classic cars,precious meta ls, jewelle ry
36 The World Wealth Report 2012 rom Capgemini and RBC Wealth Management states that the total wea lth o HNWIs amounts to US$42 tr illion.As an estimate, this would equate to just ove r US$4 trilli on o treasure asse ts, using the average igure o 9.6% reported by Ba rclays Wealth,which represents the share o treasure assets as a percentage o wealthy individuals total net worth
Highlights
Increased confdence among wealth managers:
the Deloitte ArtTactic art & nance condence
indicator34 is up 32% on the 2011 gure, rom 32.0
to 42.3, signalling an increase in condence among
wealth managers in the development o the Art &
Finance industry in the next 12 months
Economic uncertainty has increased client
demand or art and collectible investments:
53% o wealth managers stated that the
challenging economic environment is the main
motivation or their clients to include art in their
overall wealth portolio (up rom 28% in 2011).A large majority (60%) o wealth managers believe
that we will see stronger demand in the uture or
collectible and emotional assets, as a result o the
current economic uncertainty in the world
The value o treasure assets35 is an estimated
US$4 trillion: wealthy individuals hold an average
o 9.6% o their total net worth in treasure assets;
this equates to just over US$4 trillion36 o treasure
assets
There is heightened awareness among wealth
managers about the development o art as an
asset class: a total o 43% o the wealth managerssurveyed said they were strongly aware o the
developments taking place with regard to art as an
asset class, up rom 33% in 2011. This suggests that
the increasing number o initiatives related to Art &
Finance, such as seminars, conerences, university
courses and publications like this Art & Finance
Report, as well as the general media, are starting
to broaden the awareness o this emerging industry
and asset class
A majority o private banks already oer art-
related services: a signicant majority (71%) o
banks surveyed already oer art-related services to
their clients. Although the most common service
relates to client entertainment (63%), an increasing
number o banks are oering art advisory (57%)
and art valuation services (47%)
Client demand is opening up possibilities or
closer collaboration between wealth managers
and art proessionals: wealth managers should
consider integrating art into their service oering
to meet clients needs, and collaborate with art
proessionals who are requested to provide services
that ocus on the nancial aspects o transacting
and owning art
The increasing value o art is triggering the
need or new wealth management services:
43% o wealth managers said that the increasing
value o art is triggering a need or banking services
to protect, enhance or monetise this value (up rom
27% in 2011)
The role o art in wealth management is
changing: the uture role o art services in wealth
management is moving rom client entertainment
to art wealth management services, with only 27%o the wealth managers seeing client entertainment
as a primary motivation in the uture (down rom
61% in 2011)
The emotional value o art is the strongest
motivation or collectors: 83% o the art
collectors surveyed said the emotional value o
buying art was most important. It is important
that wealth managers recognise that the strongest
reason or buying and owning art remains the
emotional actor
There is heightened awareness among wealth managersabout the development o art as an asset class
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Opportunities or wealth managers and art
proessionals
Both wealth managers and art proessionals are acing
new client demands, which are opening up possibilities
or closer collaboration between these two industries.
Wealth managers should consider integrating art into
their service oering to meet clients needs, and col-
laborate with art proessionals who are requested to
provide services that ocus on the nancial aspects o
transacting and owning art.
The ollowing trends suggest a move to urther
collaboration between wealth managers and art
proessionals to serve the same Art & Finance
clients.
1. The increasing popularity o valuable tangible
assets: art and collectibles38 represent a signicant
proportion o the total assets o many high net
worth individuals (HNWIs). This is supported by a
number o research reports published in 2012. The
Knight Frank/Citibank Wealth Report39 reported
that 59%40 o HNWIs already invest in ne art
and collectibles. According to another report by
Barclays41, wealthy individuals hold an average o
9.6% o their total net worth in treasure assets,
equating to just over US$4 trillion42 o treasure assets
globally.
2. The need or tailored private banking services: art
acts as a dierentiator. The recent ndings rom the
Deloitte ArtTactic Art Wealth Management Survey
point to a shit towards a more holistic approach to
the role o art in wealth management. Clients are
increasingly requiring that wealth managers help to
protect, maintain, leverage and enhance the value o
their art assets. This presents both opportunities and
challenges, which will be discussed in more detail in
this section.
38 An asset o limited supply wh ich would include objec ts such as stamps, antiques, coins, mus ical instruments, classic cars, jeweller y and works o art39 Knight Frank & Cit i Private Bank , 2012, The Wealth Repor t http://thewealthreport.net/ The-Wealth-Repor t-2012.pd
40 This is a global igure. The breakdown by region is: North America 89%, Latin America 42%, Europe & Russia 67%, Arica and Middle East 30%, AsiaPaciic 62%
41 Barclays Wealth Insight s, Volume 15: Proit or Pleasure? Explor ing the Motivations Behind Treasure Trends
42 The World Wealth Report 2012 rom Capgemini and RBC Wealth Management states that the total wealth o HNWIs amounts to US$42 trillion. Thisequates to just over US$4 trillion o treasure assets using the average igure o 9.6% rom the Barclays Wealth Insights report
Figure 9. Triangular relationship: wealth manager
client art proessional
Education
Art&
Finance
Skills and knowledge exchange
Client
Artprofessionals
Wealthmanagers
Inheritance and successionplanning
Diversiication
Art secured lending
Portolio allocation
Art investmentunds
Philanthropy
Art advisory
Valuation
Collection management
Both wealth managers and art proessionalsare acing new client demands, which areopening up possibilities or closercollaboration between these two industries
Source: Deloitte Luxembourg & ArtTactic Art & Finance Report 2013
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Art & Finance Report 2013 33
Deloitte/ArtTactic Art & Finance Confdence
Indicator
As a way o measuring the condence in the Art
& Finance industry, we have launched an annual
Indicator that will act as a barometer or the changes
in condence among wealth managers towards art
investment and art secured lending.
The recent Deloitte ArtTactic Art & Finance Condence
Indicator43 is up 32% rom the last reading in 2011, rom
32.0 to 42.3, which signals an increase in condence
among wealth managers in the development o the
Art & Finance industry in the next 12 months. The
biggest change can be seen in the wealth managers
outlook on the economy in the next 12 months: none
o the wealth managers surveyed elt positive about
the 12-month economic outlook in 2011, but 30% had
a positive view on 2013. The art investment indicator
is up 20% rom 50.0 to 60.0, and signals a growingcondence in art as an alternative investment, an
observation which is echoed in other parts o the
wealth management survey. The art lending indicator is
down 20% rom 45.9 to 36.8, which suggests European
wealth managers remain pessimistic about the outlook
or art lending in Europe in the coming 12 months,
which could partly be a result o the lack o a uniorm
regulatory ramework in Europe, but also refects the
conservative lending environment that has ollowed
the banking crisis. This will be discussed urther by
Pierre Valentine, Partner at Constantine Cannon in
London, on page 40.
Figure 10. Art & Finance conidence indicator
0%
20%
10%
40%
60%
80%
100%
90%
70%
50%
30%
2011 2012
How confident are you about the economy in the next 12 months
How confident are you about art as an investment class in the next 2-3 years?
How confident are you about art lending/art finance in the next 2-3 years?
Art & Finance confidence indicator
43 Any reading below 50 implies that there is more negative than positive sentiment towards the development o the Art & Finance industry.The overall indicator is composed o the average o three sub-indicators, the economic indicator, art investment indicator and art securedlending indicator
Source: Deloitte Luxembourg & ArtTactic Art & Finance Report 2013
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General motivation and perceptions among
wealth managers, art proessionals and collectors
A. Wealth managers
Motivation: why include art and collectibles as part
o your existing wealth management service?
Economic uncertainty increases client demand or
art wealth management services: 53% o private
banks in the survey (up rom 28% in 2011) elt that
the challenging economic environment is the main
motivation or their clients to include art in their
overall wealth portolio. Economic uncertainty and the
volatile return o other traditional assets in recent yearsare orcing HNWIs to consider a wider spectrum o
alternative assets, including art and collectibles.
Art is seen by the wealth management community
as a diversication tool: diversication is one o the
strongest motivations or including art in wealth
management, with 43%44 o private banks eeling
that art is playing an important role in seeking a more
balanced portolio and asset diversication. This is
urther supported by 40% o private banks seeing art as
protection against infation (up rom 22% in 2011) and
a urther 43% o private banks viewing art as a store o
value, a signicant increase rom 28% in 2011.
This suggests that wealth managers will have to start
taking a holistic view o their clients wealth and to
develop management and reporting tools that combine
both nancial and non-nancial assets. This is supported
by the nding that 40% o the private banks surveyed
said they expected their clients to want to include art
and other collectible assets in their portolios.
Increasing competition in the private banking sector
remains a strong motivation: competition in the wealth
management industry remains the second strongest
motivation or private banks to oer art- related
services, a nding supported by 47% o the private
banks surveyed. However, this is down rom 83% in
2011. Although part o the decrease is down to regional
variations45, more importantly it could signal a shit
rom general concerns about what competitors are
doing towards increasingly having to respond to direct
requests rom clients.
Art is no longer just a client engagement tool: As thevalue o art is increasing so has the need or banking
services to protect, enhance or monetise this value:
43% o private banks see the increasing value o art
as the main motivation or integrating art into wealth
management; this is signicantly up rom 28% in 2011.
This nding suggests that private bankers increasingly
have to respond to issues concerning the management
o art-related wealth. Private banks are likely to take a
more service-driven approach to art in the uture.
In 2011, 61% o private banks considered client
entertainment as one o the strongest arguments or
incorporating art into wealth management. However,
only 27% o the banks said this was a primary
motivation in 2012. In addition to the previous ndings,
this suggests that wealth managers are increasingly
looking to start oering wealth management services
that specically involve art, rather than seeing it only
as a client marketing or branding tool.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Client entertainment
Art is accounting for a larger share of clients overall asset value/wealth
Clients are increasingly demanding their bankersto help with art related issues
Art offers protection against inflation
Art and collectibles offer portfolio and asset diversification
The value of art is increasing, triggering a need for bankrelated services to protect, enhance or monetise the value
Art is a store of value
Increasing competition in the private banking sectorforces new ideas, products and solutions
Client demand: Economic situation investors looking fornew investment opportunities
2012
2011
Figure 11. What do you consider the strongest arguments or including art and collectibles in traditional
wealth management/private banking?
Source: Deloitte Luxembourg & ArtTactic Art & Finance Report 2013
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Art & Finance Report 2013 35
Current involvement: how do you currently engage
with art?
The majority o private banks (71%) already oer art
related services to their clients. Although art and
client entertainment remains a core service among
63% o the banks surveyed, an increasing number o
banks are also oering art advisory46 (57%) and art
valuation services47 (47%). 37% o the wealth managers
surveyed said they oered their clients art collection
management services (up rom 17% in 2011) and
40% o the private banks are oering inheritance and
succession planning related to art. This suggests that
banks are increasingly involved in areas surrounding themanagement o art wealth.
Art investment unds: o the banks that already oer
art-related services, a total o 30% said they oer
their clients access to art investment unds. This is
signicantly up rom 11% in 2011. However, only 26%
o the banks said that they oer their clients advice on
investing in art investment unds. This could suggest
that wealth managers are responding to client requests
about art investment unds rather than taking a more
proactive role in giving advice on how to access and
invest in these types o investments (see section 3 or
more inormation on art investment unds).
More private banks are oering art-related education:
40% o private banks are oering client education
(directly or via third-party) related to art and the art
market; this is up rom 28% in 2011. This is most likely
a result o many o the new educational initiatives (see
section 6) that have been initiated in the last couple
o years.
44 A decrease rom 57% 2011; however, this is largely due to sample variations, as the 2012 survey included private banks operating in Spain and Poland
45 Only 14% o the Spanish private banks said this was a major motivation, versus 54% o Luxembourg and 50% o Polish private banks
46 Art advisory is a term commonly used or a wide range o art-related services ranging rom advice on buying and selling works o art to theirregistration, maintenance, conservation, handling and installation. Although collection management and valuation are treated as separateservices or the purpose o this survey, the se are oten deined as part o an art advisory role or ser vice
47 Includes air market valuations, valuations or charitable donations, insurance valuations or loans, indemniication valuations or governmentapplications and auction estimates or sale
Economic uncertaintyincreases client demandor art wealth managementservices
Art philanthropy/individual giving to the arts(gifts, donations, etc.)
Art lending/finance (using art asa collateral for loans)
Art/collectibles investment funds
Art collection management
Inheritance and succession planning
Client education (seminars, conferences
on art/the art market)
Sponsorship
Art valuation
Art advisory (buying/selling art)
Client entertainment (private views, art fairs,museum exhibitions)
0% 10% 20% 30% 40% 50% 60% 70%
2012
2011
Figure 12. Which o the ollowing art-related services do you oer?
Source: Deloitte Luxembourg & ArtTactic Art & Finance Report 2013
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22%
36%
53%
55%
65%
67%
75%
75%
84%
100%
78%
64%
47%
45%
35%
33%
25%
25%
16%
0%
Art/collectibles investment funds
Art valuation
Art advisory (buying/selling art)
Art collection management
Inheritance and succession planning
Art philanthropy/individual giving
to the arts (gifts, donations,
Art lending/finance (using art as
a collateral for loans)
Client education (seminars, conferenceson art/the art market)
Client entertainment (private views,art fairs, museum
Sponsorship
Offered in-house
Delivered by a 3rd party
These ndings suggest that banks are investing in art-
related services, and that the value o these services
is increasingly having a strategic role in traditional
wealth management. As competition in the wealth
management industry intensies, we are likely to
see more private banks and amily oces acquiring
expertise on art and collectibles. This trend presents a
unique opportunity or the art industry (art advisors,
appraisers, auctions houses and other specialists)
to develop closer relationships with the wealth
management community, particularly as 64% o art
valuations, 47% o art advisory work and 45% o art
collection management is currently being conducted
by third parties. A total o 77% o the private banks
surveyed said they would outsource these art wealth
management services in the uture, which su