NEW YORK—Dubai-based Emirates NBD, the largest bank in the United Arab Emirates in terms of assets, announced a partnership with the London-based Fine Art Fund Group, a private art investment company formed in 2001, to provide consulting services to the bank’s private banking clients who are seeking to buy art as an investment.
The Fine Art Fund Group will provide a number of services to Emirates NBD clients. The first is consulting, “educating them about the art market and providing them access to buyers and sellers,” according to Rhea Papanicolaou-Frangista, the fund’s associate director. Clients also may invest in the Fine Art Fund Group’s most recently established fund, the Fine Art Fund III, which invests in artworks by blue-chip artists in categories including Old Masters and Impressionist, modern, and contemporary art.
The bank will also set up individual private managed accounts for clients “who don’t want to mix their money with other people’s money in a general fund,” said Philip Hoffman, CEO of the Fine Art Fund. Clients must invest a minimum of $1million to participate in either the group or individual funds, according to Hoffman.
The Fine Art Fund began offering individually managed art accounts to its regular investors in mid-2010, and to date ten people have signed up for them, according to Hoffman. Over all, the Fund has approximately 100 investors, with total assets of $100million, he added.
“Art as a tangible asset continues to attract international investor attention in the post-recession world and the market for art has remained strong in 2010,” Gary Dugan, acting general manager and chief investment officer of private banking at Emirates NBD, said in a statement. “Middle East investors are also expressing greater interest in art,” he added.
Skepticism About Short Track Record
In the past decade, a number of investment companies in the U.S. and Europe have announced plans to develop art hedge funds, but few have actually succeeded in attracting investors and creating these types of funds.
“Setting up one of these funds is harder than it would seem,” said Michael Moses, one of two directors of Beautiful Asset Advisors, which produces an art price index for subscribers.
Moses pointed out that all hedge funds are based on finding and taking advantage market inefficiencies. “You want to find things that are undervalued and then to sell them at market price.” He said that the art market is not particularly inefficient, however—most artworks are correctly valued—and “you may not be able to support a large number of funds of this kind.”
Other art funds include the Kansas City, Mo.–based The Collectors Fund, which was started in 2007 by Alexander Kemper and focuses on American art. Its investors are individuals and corporations, who, for an additional $1,500, can have the artworks in the portfolio rotated to their homes and offices.
Castlestone Management in London, runs 19 different hedge funds. Its Collection of Modern Art Fund, launched in 2009, invests in Postwar art by “non-producing or deceased artists,” buying and holding artworks in its collection and making loans to museums and exhibitions to add to the works’ provenances.