7 Nov 2006

Banking on Art

I wrote the following article for Financial Times, Bangalore, and it was carried on Nov 4, 2006 in the print version.

With appreciating art prices, art is increasingly seen as an investment option by individuals and Institutions. It now joins other investment avenues such as real estate and mutual funds as a viable and practical alternative. Banks too have started taking an interest in art, in fact Banks have been promoting and sponsoring art events and even artists for some time now.

High Net worth Individuals (HNIs) are actively wooed by Banks in order to manage their investment portfolios. As art becomes all about high finances and sometimes even higher returns, it is not surprising that it is slowly becoming a part of investment portfolios. Surajit Thakur, Senior Vice President and Regional Head of HSBC Bank explains, “There is a lot of latent demand. Artists are doing great work and art has emerged as an alternate class of asset for investment, just like property and mutual funds.”

Growing demand and the ease in trading has ensured that even the uninitiated have started to take an interest in art, even if it is purely for financial reasons. At the same time some financial advisors feel that there is no doubt that the demand is increasing, and more and more people are interested in investing in art; however, it is a niche segment that actually approaches Banks for specialized guidance. Serious art collectors are very likely to have their own databases and an extensive understanding of the trends in the art market; it is usually the first time buyers and upcoming collectors that require expert help.

Surajit Thakur feels with the involvement of Banks, it brings its own set of competencies - an understanding of art, evaluation of its intrinsic value, the commercial angle and at the same time they can show customers the returns and its appreciation trend.

Art collector, Harish Padmanabha believes it is a very good trend since Indian contemporary art market is very active and has gone international as well. He says, “Where earlier art had more of a decorative value, now it is a good investment option, similar to the West, thanks to easy trading. Auctions of repute in various cities like Singapore, New York and London have become common.”

Since it is an asset now, Banks will get involved. Just as financial advisors provide guidance on the stock market and mutual funds and manage portfolios on behalf of their clients, the art market is similar. An understanding of art and the market trends will be of great help to the uninitiated. Padmanabha asserts that since Banks have their reputation to protect and their money, they will therefore make sure that they provide experts to guide their clients.

Art too is not free of investment risks, unless one plays safe and buys the top end of the artists. But, most of the times these will be out of range for a good number of people. He advises, “The mid-level artists may not be doing too well in international auctions but generally their market within the country is quite safe.” When it comes to upcoming artists, one can never predict with certainty. However, it is better to have expert help since it is a specialized field. A combination of art expertise and financial know-how seems like a healthy blend, and more and more people are likely to take advantage of this trend.

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