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July 6, 2011

Hedgehog Issue 21

By Spear's

Gulls’ eggs, golden eggs, it’s Hedgehog.

King Kalakua of Hawaii and Andy Warhol might not seem to have anything to do with each other. In fact, both have enjoyed brief cameo appearances in the elaborate fictions of imaginative art fraudsters, as attendees heard at a course on due diligence in art investing held at the Berkeley Hotel.

Introducing the course, Randall Willette of Fine Art Wealth Management Ltd reminded those present of the perils of investing in what is still a largely unregulated market: lack of price standardisation, low liquidity and emotionally driven decision making. These would seem to be the least of potential art investors’ worries, though: as much creativity and originality are ploughed into art fraud and forgery as went into the great works whose fakes fill the walls of creatively inclined criminals.

It was left to Richard Ellis, a specialist art crime investigator for over twenty years and general manager of Christie’s Fine Art Security Services, to inform his audience of the link between Warhol and King Kalakua. With fascinating tales about large-scale art crime up his sleeve (which is where some of the more sensitive details remained), one senses Ellis would be an excellent dinner-party guest. The fakes and forgeries industry, according to Ellis, is ‘absolutely booming’  due mainly, no doubt, to the ingenuity of its criminals, he told the delegates, wealth managers family offices.

One case Ellis talked about featured fraudsters who were found to have manufactured three fake ‘Hawaiian’ coins out of real gold, bronze and silver, and who marketed the products by means of a labyrinthine strategy involving an unknowing Swiss bank and Sotheby’s. They knew their Hawaiian history: King Kalakua of Hawaii ran a coin competition in the mid-1880s, the winner of which had their design printed on the country’s national coinage. The fake coins were created in line with this historical event to bolster their appearance of legitimacy.

The same operators — who are probably not lacking a pretty wicked sense of humour — are thought to be behind the supposed artist and good friend of Andy Warhol’s, Pietro Psaier. However, it is strongly suspected that Psaier, who allegedly died in the 2004 tsunami in Sri Lanka, never even existed, and that he is a fabrication of the Hawaiian coin forgers. Attempts to recover birth and death certificates for Psaier — whose ‘works’ have been flying out of auction houses for the past fourteen years — have proved unsuccessful, and the Warhol Foundation say it has never heard of him. The consensus is that he was invented to fill a niche in the market and that documentation has been forged to support sales of his paintings.

Non-existent artists, however, are just one potential problem for art investors, who are sometimes baffled by more than one instance of exactly the same painting. One of the more amusing stories told by Ellis featured the Manhattan-based Iranian art dealer Ely Sakhai, who bought a raft of Impressionist and Post-Impressionist paintings in the 1980s and had them all impeccably forged by Chinese immigrants.

Sakhai made a fortune selling the fakes to Asian collectors, many of whom do not trouble to have paintings’ provenances checked by European experts, and offering the originals to London and New York auction houses. In 2000 art buyers were spoilt for choice when both Christie’s and Sotheby’s offered Vase de Fleurs by Gauguin. Sotheby’s had the real one, but Sakhai, perhaps growing complacent after too much success, failed to cover his tracks and was linked to both works. He was fined $12.5 million and imprisoned for 41 months in 2004.

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Fine art investment may be becoming increasingly popular for HNWs, but one came away from the course with a strong sense of what a minefield it is. Also featuring talks on the importance of restoration, conservation and the scientific examination of art works, Willette’s course provided pricelss pointers for wealth managers and HNWs looking to make an investment of passion in a complex field. And if anyone bumps into Psaier — let us know.

It quickly gets boring buying stuffed crocodiles and antique cassette tapes on eBay. The objects are negligible, the amounts tiny. Where is the eBay for grown-ups? That’s where Jamie Apold’s Asset-Ex comes in.

Apold, a former lawyer now based in Switzerland, took Hedgehog on a tour of, which allows people to buy and sell businesses and materiel on a grand scale, from a dozen tractors to a chain of shops. (There is no option on eBay for prices above US$5 billion, but there is on Asset-Ex.) As well as having the basic functions which allow you to search for businesses or put up a virtual ‘wanted’ notice, Asset-Ex innovates by facilitating the deals with an online data room, to which you can upload everything from shareholder agreements to proof of funds. You’ll want to call in your lawyers before you buy, but having all the documents online could make a deal much easier.

‘He used words I’ll remember forever: “You are the antichrist!”’ says Apold of a merchant banker who collared him in a continental hotel. He sees his model as upsetting the merchant banks’ traditional role of finding preferred clients for certain deals; as with most things on the internet, the barriers have come down and anyone can talk to anyone, hence the anger. Using his lawyerly tongue, Apold says he talked the abuser round, explaining that more efficient deal-making helped everyone.

In its first six weeks of operation, Asset-Ex had twenty vendors selling assets worth, on average, $10 million and 30 buyers hunting around. It’s a damn sight (site?) better than eBay’s second-hand carriage clocks or personalised numberplates.

With all the hullabaloo made over sovereign wealth funds, it’s surprising that one of the largest is one of the most discreet. Or perhaps not so surprising when you consider that it is Norway’s, a country not known for aggressive self-promotion.

According to Business Week, the Government Pension Fund Global has $570 billion in it, more than Abu Dhabi Investment Authority’s much noisier $500 billion. Given how dependent it is on oil — along with the allied business of shipping, one of Norway’s principal industries — and what has happened to the oil price of late, the fund has boomed and allowed Norway to make large strategic purchases in new asset classes. The most notable of these was a quarter of Regent Street for $746 million; the receipt would have had ‘Dieu et Mon Droit’ at the top since the seller was the Queen. Further big-ticket shopping sprees cannot be far away.

Steen Foldberg, market leader for the Nordic region, Belgium and Luxembourg at Merrill Lynch Wealth Management, says that the SWF money has been used with restraint: ‘Compared to a lot of other oil-producing nations, they created a lot of funds for the citizens. They were very concerned that the salary levels, house prices wouldn’t get out of hand. Just because they found oil, they didn’t go crazy. They’ve accumulated this oil wealth and they’ll be careful about it; they’ll have a reserve of capital.’

The wider range of investments made by the SWF is reflected in HNWs’ portfolios (there are 75,000 dollar millionaires), which tended to be weighted with Norwegian assets, Foldberg says: ‘Norwegian investors until relatively recently were rather unsophisticated — very conservative investors predominantly in bonds.’ Now they are keen on infrastructure and biotech start-ups, and are looking to allocate money abroad too.

So should you be thinking about taking advantage of this Scandinavian uptick? Norwegians would.

A Knightsbridge penthouse is a fine thing at the best of times, so imagine the pleasure that can be derived from sitting in one while someone brings you delightful objects and champagne. That’s what The Penthouse, the new space for Harrods By Appointment, its personal shopping service, offers, as well as a roof terrace, an exceedingly rare beast in SW1 and something not be neglected in the summer months.

Abigail Rainer, head of By Appointment and director of Fashion Accessories and Fine Jewellery, says that it was time Harrods had a space which could embrace personal shopping beyond clothes, expanding into homewares and more. ‘We’ve had growth in those areas, and now we have a space for entertaining.’ (Luxury brands will host launches and events in The Penthouse.)

It is a bright, elegant space which can be reconfigured endlessly. There is a lighting array which wouldn’t disgrace a rock band’s stadium tour, and dressing rooms (you can shop for clothes here too) you might find in a chic house on Hans Place.

Despite the many advances made in critical reception, curatorial recognition, and value, the demand for work by certain superlative women artists continues to lag behind that of their male counterparts. Berthe Morisot was, at her best, as good as any of her male French Impressionist counterparts, but she continues to be underappreciated. Louise Bourgeois is one of the greatest sculptors of the 20th century, but demand for her art is no match for another figure whose art was also difficult to categorise and who matured at about the same time, Alberto Giacometti.

One artist that warrants a much closer look is Lee Krasner, a woman whose reputation and work we believe remains significantly undervalued. For years Lee Krasner was better known as Mrs Jackson Pollock than as the pioneering first-generation Abstract Expressionist painter that she, indeed, was. For most of her life the heroic myth of Jackson Pollock overshadowed her own artistic accomplishment.

Krasner herself contributed to this fact. She was devoted to her husband’s career and openly relinquished credit to Pollock for all innovation. She did little to promote her own work.

In 1983 Krasner had her first museum retrospective at the Museum of Modern Art and other institutions of note. While these re-evaluations have certainly helped to elevate her historical role, Krasner still lags well behind not only Pollock but also her other New York School peers. The record for Krasner at auction is $3.1 million, while the record for Pollock is $11.6 million. In the private market some major Pollocks command prices upwards of $100 million. Even at its new record levels, we believe there is great opportunity in the Krasner market — especially as the supply of great mid-century Abstract Expressionist painting continues to diminish.

Citi Private Bank Art Advisory.
Citi Private Bank are the sponsors of the Spear’s Book Awards 2011
Giving is good as long as you’re getting, some wise women once said. But that’s far too self-centred a worldview for the modern philanthropist. Instead of the mercantile chucking of cash at institutions in return for your name above the lintel, you’ve got to give cleverly, and according to a recent survey from New Philanthropy Capital, most people want guidance on giving.

Banks, who may have been unsystematic heretofore in their philanthropy offering, are now ensuring they have point-men to co-ordinate the business of giving. Declan Sheehan, CEO of HSBC Private Bank, recently announced the hiring of Russell Prior as head of philanthropy, a new position to ensure clients know whom to turn to when the giving itch strikes. Prior has been at both Barclays Wealth and the Charities Aid Foundation, so he has seen the givers and the receivers at first hand.

‘We didn’t have someone dedicated to talking to families about the strategy of philanthropic giving,’ says Sheehan. ‘We want him to lead our education initiative and not just to create a virtual network but a real network among our clients and advisers.’

Sheehan compared HSBC’s heavily entrepreneurial client base to the British businessmen of the 18th century, who made plenty of money quickly and wanted to give it back. They have been inspired, he said, by the grand gestures of Bill Gates and Warren Buffett with their Giving Pledge and by the evident pain suffered by charities in the downturn, but it does not hurt that the highest rate of tax is 50 per cent. They face issues about whether to set up a foundation or to give to established charities, and if to established charities, the large few who attract most donations or small bodies where you’ll get more bang for your buck.

The networking idea is particularly important to Sheehan. If he can assemble some of HSBC Private Bank’s philanthropic clients around a table, as he has started to do, to make connections and foster giving, ‘Who knows — perhaps some flowers will bloom?’

The year is 2100, and the library is large and dimly lit. Students sit along chrome tables, bent over their e-readers, their faces faintly illuminated by their thought-responsive screens, turning the pages with their minds. One gets up and reaches for a heavy leather-bound volume on one of the shelves, and extracts it, pondering over the unfamiliar paper pages and ink-printed text. How, he wonders, did anyone ever use these old things?

Fighting against this dystopia of Kindles and iPads supplanting the book as object are Prometheus Bound with their customised leather-bound volumes, who are once again providing the prizes for the Spear’s Book Awards on 27 June. ‘With the rise of the e-reader, I think that books are more than ever becoming a special object,’ co-founder Sue Williams says.

Williams is certainly right: books are not simply a means to an end, but items to be loved in and of themselves. Burning down a library is considered an act of almost inhuman barbarism, but does stamping on an e-reader provoke the same depth of emotion?

Williams and her partner Marie Stephens at Prometheus Bound believe that if a future without books feels bleak, past traditions of bookbinding craftsmanship may be more inspiring. Their bespoke, contemporary, hand-bound and embossed books bring the almost-forgotten craft of bookbinding into the 21st century for a beautiful, personalised product that no nifty gadget can match.

As well as offering off-the-shelf hand-bound books and bespoke services, Prometheus Bound has introduced a new range of products including a three-year journal, visitors books, and a multi-purpose binder perfect for collectables. Prices for a bespoke, hand-bound book start at £85, which is cheaper than a Kindle, but much more valuable.

Extreme sports have long been alluring to gentlemen of the City: evidently the adrenaline induced by staking their clients’ money and their careers on risky bets can’t be allowed to subside, hence trips up mountains and down submarine crevasses. One activity worth considering for the danger and for the reward, were it not highly regulated, would be scaling vertiginous cliffs to retrieve gulls’ eggs.

As recondite as that seems, the gull’s egg — green, with dark speckles — plays a significant role in the City’s social and philanthropic calendar. The annual Gulls’ Eggs City Luncheon, held in May this year — as for the past few years — in the airy chamber and sunny courtyard of Merchant Taylors’ Hall, brought together 600 of London’s top wealth managers, bankers and lawyers to feast on the eggs and plum cake.

The eggs are a delicacy because Defra tightly controls their collection: only around 40,000 are gathered by 25 licensed specialists every year. They are a translucent grey when boiled and richer than hens’ eggs.

Zoe Couper, founder of strategic advisory and communications firm Couper & Partners, is in her second year as chairman. ‘It’s slightly quirky,’ she says. ‘Eccentrically English. It brings people together.’

The luncheon was founded by Mark Cannon Brookes of Smith & Williamson. ‘There was a very well-known man of impeccable descent who had a grouse moor and they had a gullery too, so we didn’t need to ask permission [of the government]. They cost about 4p each. Unfortunately the gulls shoved off, but he continued to buy them.’ The eggs, due to their rarity, now cost £4 each.

Part of Zoe’s challenge has been to reinvigorate the event, ‘maintaining its integrity and tone’, she says, without ruining it for its more senior attendees. She has done this by broadening it out to other wealth management sectors — private equity and hedgies, for example — and said that one idea under consideration was holding an additional event nearer Christmas in the West End.

The luncheon has acquired standing and was this year as full as ever, the true start of the City’s summer.
For many years, a long stretch of the Bayswater Road was concealed behind clever hoardings, book spines and coloured pencils making a jagged fence between the traffic and a massive building project which was only unveiled last year.

The Lancasters, a joint venture by Northacre and Minerva, has turned a dreary, run-down block into 77 prime apartments. 68 per cent have been sold to buyers from around the world; rumour has it that a dozen have been bought by one Russian billionaire. The third and final phase is being released in June, ranging from £900,000 to £17 million. (Apply at Savills and Hamptons with proof of funds.)

Although the project is not due to be completed until this autumn, wandering around one of the apartments gives you a flavour of how expansive its aims are. The dining room, with its light purple wallpaper’s subtle seascape, runs through fourteen-foot-high columns into a drawing room, past high windows looking out on to the park.

The kitchen is overlooked by a glass mezzanine, seizing extra space. A (perhaps symbolic) gilded birdcage hangs in an atrium. There are two new show apartments now, one by Linley Interiors, the other by Lawson Robb.

As Hedgehog walked around one of the unfinished spaces, there were blown-up black and white photos —the sort that typify New York in the Twenties — showing the iron belt and beams needed to stop the Grade II-listed facade of the hollowed-out terrace collapsing, showing the interior rubble after decades of neglect had been cleared away.

The project is not important for the size of the rooms or the plentiful facilities, but because the Lancasters are putting the shine on a heretofore shabby party of London, regenerating a whole area within its shadow.

You wouldn’t think that beaches could have postal addresses: Mr Smith, Third Beach Hut on the Left, Barbados. But you know where to send letters for One Sandy Lane. Just beyond the hotel, with its pink accents and pinker bodies, this development of eight luxury apartments ($20 million-plus) gives a prime spot on the prime beach on the prime island in the Caribbean.

Jessica Dee Rohm from One Sandy Lane was eloquent on the benefits of a place of your own to retreat to after a hard day waterskiing and avoiding piña coladas while at the Cliff. As well as the five bedrooms and the five-and-a-half bathrooms, there are staff quarters and biometric entry. Above all, it has the same benefit of a home anywhere: you don’t have to wonder who else has slept in your bed. (Unless you’ve invited them in, of course.)

Finally, One Sandy Lane is in fact the address, not just a marketing gimmick around the number one. What can we be thinking of? Answers on a postcard to 100 Knightsbridge.

The Hedgehog is supported by B Capital Wealth Management

Illustration by George Leigh

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