051, economic times, 4 july 2008

FRIDAY, JULY 4, 2008

Stocks-hit investors cosy up to art by Shailesh Menon Source: Economic Times

MUMBAI: Investors may not be willing to touch equities with a barge pole, but they still appear to be open to art as an alternative asset class.

Contrary to popular belief, the ongoing bearish phase in the stock market has not impacted the sentiment for art. Thanks to corrected prices, prospective art collectors and investors are queuing up to buy quality works of art at “realistic” prices, say art advisors.

The ET Art index has only tripped 8% over the past six months, in sharp contrast to equities, which have fallen nearly 40% from their peaks at the start of this year. According to art advisors, post the deep correction in contemporary art segment in mid-2007, investors (predominantly ultra-high net worth individuals — UHNIs) are thronging auctions and galleries to buy or invest in quality works of both masters and amateur artists.

Record price-tags for the paintings of FN Souza, Tyeb Mehta and Subodh Gupta — at Christie’s and Sotheby’s — are testimonies to the fact that Indian art has fast gained a foothold in the international art market.

“For sure, even in these times of bad stock markets, art is still holding on as a good investment option. People are still buying quality art (work of masters) even though prices are trending up,” said Osian Art Advisory manager Lynn Sivanand.

Echoing Ms Sivanand, Ajay Seth of Copal Art said: “Even amateur artists with good probability of an upside in prices are getting good quotes in the art market.”

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Art emerged as an exotic asset class in the four-year bull run in the equities market. Viewing it as an opportunity to corner more high net worth individuals, several equity broking houses began advising clients on investments in art.

Dawnay Day AV, HSBC, Edelweiss Capital, DSP Merrill Lynch, Kotak, Citibank, ABN Amro and ASK Wealth Advisors are some of the financial majors vying for the top spot in this segment.

“If you look on client-to-client basis, there is a small shift of investments from art to equities.

Currently, investors are moving surplus funds to equities market. But then, that is not causing a crisis (like a sell-off) as there is great interest from genuine art aficionados to collect quality works at corrected prices,” said Dawnay Day AV executive director Surabhi Gupta.

“Moreover, equities market do not directly impact art market as the profile of players here are different. The art market is not going through a slowdown,” said Edelweiss Capital alternative investment head Anurag Mehrotra.

However, none of the brokerages (or galleries) have any plans to raise art funds in the near term. According to investment advisors, the Sebi diktat, restraining unregistered entities from pooling in money to float art funds, is coming in the way of these entities to raise fresh funds.

As per Sebi, an art fund is a ‘collective investment scheme’ — wherein money is collected from public — and therefore, it is mandatory for them to have a certificate of registration as a ‘collective investment management company.’