Following a trail of Francis Bacon and Gerhard Richter paintings into Asia, a London-based art fund is setting up in the region with plans to deploy at least $1bn over the next decade lending to collectors.
The push into Asia for The Fine Art Group, which specialises in using art as collateral for lending, comes on the back of what it calls an increasing concentration of western art holdings with Asian families. The fund will open its first Asia offices in Shanghai and Hong Kong in early 2018, according to Philip Hoffman, founder and chief executive of the group.
“We see the lending capabilities easily at $1bn over the next 10 years and have the backing from investors to do this,” Mr Hoffman said.
Asia has hosted a number of record-breaking art auctions over the past five years, such as the $170m sale of Amedeo Modigliani’s oil portrait Nu couché (Reclining Nude) to Chinese tycoon Liu Yiqian in 2015. Mr Liu famously paid for the work with his American Express card.
Other pieces — by Vincent van Gogh, Francis Bacon and Jenny Saville — have been snapped up at record prices by Asia-based collectors, most of whom hail from China. Asia has also seen a rapid expansion of auction businesses such as Sotheby’s and Christie’s, which were allowed entry into China only in 2013. A Chinese company with links to Mao Zedong recently bought a stake in Sotheby’s.
Over the past five years, experts say that prices for Asian art have risen to comparable levels with western pieces, pushing many collectors in the region to shift their focus to western works.
“The mainland Chinese investors all of a sudden realised that Chinese prices were the same as western prices, and when that happened they really started buying a lot [of western art],” said Pearl Lam, owner of the eponymous galleries in Hong Kong, Shanghai and Singapore.
The shift to western art investment is one of the factors that has helped The Fine Art Group launch in Asia because western works are often easier to use as collateral. The company lends to collectors that are looking to buy high-grade western art but has also made a business of taking as collateral artworks owned by collectors in order to lend to them.
Using art as collateral for loans is not new in Asia — several private banks in the region such as Lombard Odier run similar businesses — but Mr Hoffman says that funds specialising in the business are virtually unknown in the region. Many collectors in Asia, he said, are unaware that such services exist.
“Often they have $100m tied up in art and didn’t know they could borrow against it,” Mr Hoffman said of Asian art investors. “In Asia it’s much more common for them to borrow because they have a deal they want to do.”
Asia is home to up to 40 families that hold a collective $8bn-$12bn in western artwork, with the majority of those investments being made over the past 10 years, Mr Hoffman said.
Get alerts on Financial services when a new story is published