Those who hunger for high-risk, high-yield alternative investments need not confine themselves to trying to locate the next Damien Hirst on the cheap.
Those who hunger for high-risk, high-yield alternative investments need not confine themselves to trying to locate the next Damien Hirst on the cheap. Thanks to Robert Fraser Asset Management, anybody with half a million burning a hole in their pocket can quintuple it if they pick the right shipwreck.
Or lose the whole shebang. But that goes with the terrain.
The structure was created a year ago by two long-term partners, a chartered accountant, Nicholas Pilbrow, and Colin Emson, whose notion it was.
‘There are hundreds of thousands of wrecks all over the world,’ Emson says. ‘The Spanish government have by far the greatest number of galleons laden with goodies on the seabed. They are the biggest players by a very long way. They grant licences to go after identified ships for a certain period of time.
‘But they only give licences if they know in advance that they are going to get their share, which can be anything from 20 to 50 per cent, depending on the level of risk and uncertainty. Every wreck is a different situation.
‘Portugal will not grant licenses to anybody and is not searching for the wrecks itself. And yet the Portuguese coast has got more gold bullion lying on it than anywhere except Spain and the Caribbean.’
He suspects that the Portuguese don’t really want to share at all, but aren’t yet in shape technically or economically to do the job themselves, so are playing a waiting game.
‘Cuba has a massive number of wrecks but has granted an exclusive contract to a Canadian company. They are very secretive. And there’s no messing around. I asked the other day what would happen if we turned up. They said you’d get a gunship.’
The ideal investor for this deep-sea treasure-hunting scheme is Mr High-Net-Worth who has a half-a-million minimum individual investment. He will normally join nine other people in a syndicate with a £5 million budget.
‘We will be looking for £25 million as our share of the booty… if we find it. So it’s a five-to-one shot… No blind pool. They are shown the ship. They are shown the report. They are shown the valuation. And they decide to invest’. Prospectuses will be available from 6th September.
It’s no news that as the art boom ascends to ever giddier heights the war between the dealers and the auction houses for power – and market share – is getting ever more ill-natured. At this moment the situation at the front is peculiarly fluid and hard to read.
Consider the auction houses. Not that many years ago, the night sales at Christie’s and Sotheby’s were humdrum affairs, only attended by dealers. But Al Taubman, the shopping centre billionaire, who had acquired Sotheby’s, focused his shrewd retail brain on the matter.
And in the 1980s the night sales in media-mad Manhattan became ‘events’. So far as sellers were concerned, the media saturation of the auction process definitely tipped the scales in favour of the duopoly.
Then came the art fairs. There had always been art fairs, but they had been pretty much trade fairs. But in the 1990s dealers turned them into a vehicle for striking back at the auction houses. They became glitzy and phenomenally successful.
It was the turn of the auction houses to strike. Earlier this year, Sotheby’s, which had acquired the gallery of Robert Noortman, a dealer in Old Masters and a pillar of Maastricht, perhaps the grandest of the fairs, thereby gained entrance to the fair, albeit as Noortman, not as Sotheby’s. Christie’s promptly muscled their way in too.
The dealers were affronted, and alarmed. Thus, when Christie’s bought up the Haunch of Venison, a London gallery that specializes in cutting-edge contemporary art, they struck back in their turn. Haunch was blackballed from London’s principal art fair, Frieze. Other fairs will doubtless in the long term prove to be equally exclusivist.
The interesting thing is this. Dealers manage artists’ careers. And careers need nurturing. Dealers are not answerable to shareholders. It is widely assumed that the auction houses will become more muscular in the future and will exert more power.
But how? As set up, they are simply not equipped for this on-the-spot management. And should they try, the spectre of monopoly will loom. Perhaps the last unregulated legal money market should be looking at regulatory forces but, if so, such forces will find it a daunting task.
WEALTH OF NATION
It seems that ‘Wealth. What’s it to you?’ – the ubiquitous glossy ad campaign that has marketed Barclays Wealth as if it were a HNW luxury brand – is more than just a slogan. Judging by the interim results just released as we go to press, client sensitivity appears to be paying off, with Barclays Wealth’s profits before tax up 34 per cent to £173 million for the six months to 30th June.
Despite having difficulties cracking the ultra-high-net-worth client base in the UK, Barclays Wealth remains the UK’s leading wealth manager in terms of assets under management.
Another company flush with success is St James’s Place, who has just unveiled a 50 per cent leap in profits. The firm has offices as far afield as the picturesque village of Witham in Suffolk and Mayfair.
MIAMI: THE NEW MONTPARNASSE
The global appetite among HNWs for investing in art – as an alternative investment rather than just something decorative to hang on the walls – shows no sign of abating.
Just as no self-respecting multi-millionaire in the Bonfire of the Vanities decade of the 1980s would dare to contemplate living in their new Upper East Side duplex without the help of a top interior designer like Nicky Haslam, John Stefanidis or David Hicks, so no respectable millionaire would today risk setting foot in Art Basel, Maastricht, White Cube or Sotheby’s without the new essential social accessory of the HNW brigade – your own art adviser.
These advisers come in two very distinct types. One type – such as Guggenheim Asher Associates – is for people who want to enjoy gazing at their art as it rockets in market value (contemporary art sales in London grew by 348 per cent between 2001 and 2006). In other words they want to see the Damian Hirst butterfly painting they’ve bought actually adorning their walls.
The other type – typified by Philip Hoffman’s Fine Art Investment Fund (FAIR) – is all about the money. The art is bought purely for investment purposes and then stored in a vault, although some of the pieces can be ‘loaned’ to the fund’s investors on a periodic basis.
Both these approaches to art as a commodity – whether to be enjoyed or hoarded in the vault – seem profitable for now. Fine Art Investment and Research Limited, which is a division of FAIR, has just been chosen by Santander Private Bank to provide art advisory services (via Miami) to its private banking clients.
This follows the trend set by UBS, which has successfully lured top clients to Art Basel and Art Basel Miami with its invitation to a three-day jamboree of First Class travel, chauffeur-driven VIP BMWs, private dinners at the houses of the top collectors, and guided tours of the fairs.
The choice of Miami is not just a coincidence. Miami is now the new Montparnasse. Florida is to today’s art world what pre-war Paris used to be in the days when Peggy Guggenheim used to blindly buy up shows of grubby, avant-garde painters like Picasso (she bought ten) and Ernst (she bought 40) for her personal collection.
Hoffman tells us that the bank’s private clients (especially super-rich, art-hungry types in Latin America) will be getting special access to this new art advisory service through Emma Blanco, FAIR’s representative in Miami, who previously worked for Citibank and has an extensive network of contacts and experts in the art world.
One thing is certain. You can expect Hoffman to throw a big party at Art Basel Miami this December. HNWs who enjoy a glass of free champagne should not hesitate to contact Philip Hoffman for the RSVP details.
ADDICTED TO ROOM SERVICE
The Crack of Doom, that ‘dread’ phrase referring to the condition of being made homeless as a result of either selling one’s house or waiting for the London property market to cool down, has been affecting the super-rich as much as anybody else.
While some have been resorting to camping out in bed and breakfasts or staying with friends, others have been flocking to ‘luxury service apartments’ in London that cater to the itinerant rich (often nom-doms who stay for fewer than 90 days in the UK). Examples are debenture-style accommodation deals offered by 47 Park Street and 11 Cadogan Gardens.
Perhaps the most in demand are the Gloucester Park luxury apartments, close to the Gloucester Road in SW7. With a real shortage of top-end properties on the market, many HNWs – along with a small tribe of new divorcees – are using the apartment complex as a temporary refugee camp. When they are staying at the apartments, the interest that they earn on the money which has been released from their house sale pays for them to live in the apartments for free.
The capital is then available for them to do with as they wish – to travel or invest it in other ventures. ‘Many HNWs just get addicted to living the room-service lifestyle and just don’t want to move out,’ says my source at the Cheval Group, which owns the exclusive property.
The apartments include a daily maid service, 24-hour concierge, all electricity and Sky included in the substantial weekly rate. The maid will also shop at Waitrose for all your foodie needs. Gloucester Park’s longest-stay resident has been at the property for over ten years.
GODFATHER OF GIGS
Notorious gig organiser Vince Power, who founded the Mean Fiddler Music group (owner of Leeds and Reading Festivals as well as a major stakeholder in Glastonbury) now has the HNW party brigade in his sights.
After selling his event company to Clear Channel for £37 million, Power has moved from hip and grungy festivals into high profile society events. When tickets went on sale for his prestigious Berkeley Square Ball in Mayfair this year (September 27th), they sold out within two weeks.
Perhaps it’s because of the location opposite Annabel’s and the high calibre of chefs (this year Tom Aitkens, Richard Corrigan and Bryn Williams); or because last year soul legend James Brown rocked the square – his last performance in the UK. ‘If it follows Glastonbury’s popularity, next year will sell in a few hours,’ says Power.
Tickets are now available for next year.