Massimiliano Subba on Art Investment Funds and Anthea: An interview with Chiara Aluigi
MA Art Business student at Sotheby’s Institute of Art, Chiara Aluigi, sits down with the Founder and Managing Director of Anthea Art Investments AG, Massimiliano Subba, to discuss the evolving art investment funds landscape and Anthea’s place within it. Massimiliano gives insights into the various strategies adopted by art investment funds, the growth of client demand and blockchains potential applications to art investment.
courtesy of Massimiliano Subba, Managing Director of Anthea
CA: Tell us about Anthea Art Investments
MS: Anthea Art Investments AG (“Anthea”) was founded in 2008 as an investment manager for art investment funds. From 2016, Anthea expanded its services by providing private and institutional collectors access to its collection management and art advisory platform.
Generally speaking, the landscape of art investment funds has evolved at a fast pace: in 2010, the “Deloitte Art & Finance Report” counted around 60 players in art investment funds, each distinguished by their own strategy; some of them were pursuing general investment strategies, ranging their investments from Old Masters to Contemporary Art, while others were pursuing a more targeted investment strategy focusing on art from emerging markets such as China, India or the Middle East.
CA: What was Anthea’s investment strategy?
MS: Anthea’s investment funds focused only on investments in Contemporary Art, spreading the investor’s portfolio through emerging, established, and blue-chip artists. Our strategy was to invest in artists with strong career perspectives in the near term; and hold their artworks into the fund portfolio up to the point when these artists would be recognized under the higher category (i.e.: emerging to established OR established to blue-chip).
The challenge for Anthea was to identify great and promising artists who were likely to grow in recognition in the near term, and acquire their best works before that very moment. Our art advisors, Jean-Christophe Ammann and Paolo Colombo, were key people in achieving such an objective.
In my opinion, this was among the best strategies applied by art investment funds, considering the particular situation of the market at that time. In fact, the art market experienced a huge growth over the past 10 years, with a lot of new collectors coming into the scene and considering art under another point of view: that of an investment.
It must be remembered that, when talking about art investment funds, we are dealing with a product related to the world of finance. Therefore, as mentioned above, the clients of these funds are moved by a return on investment perspective and play their investing strategy according to such goals. Most of them won’t visit galleries or auction houses to acquire artworks; instead, they will go to their product-banker to be advised on the best art investment funds, in order to diversify their investment portfolio.
CA: How has the art investment funds landscape evolved since Anthea’s inception?
MS: Since then the market has changed substantially. In the last 10 years, other products have become more established on the market such as ETF (exchange-traded funds), offering to investors relevant advantages in terms of lower management costs, and good portfolio diversification.
Traditional investment funds used to charge the traditional 2/20 structure (2% management fees and 20% success fees). Differently from that, ETFs offer a much more competitive cost structure: an ETF doesn't bear a 2% management fee, but rather its management costs are a fraction of it and are measured in “basis points” (0.10%, 0.20% etc.), allowing the investor to benefit from a much more cost effective product.
In addition to that, ETF do not bear success fees, allowing investors to entirely benefit from the investment’s appreciation. While traditional investment funds are active and dynamic, in the sense that investment managers constantly monitor and change the assets portfolio in order to maximise the fund investment’s performance, ETF are “passive” which means that their asset allocation stays unchanged for the entire life of the product.
ETFs provide investors with a simpler and more cost effective way to achieve a fairly acceptable, mainstream portfolio diversification. ETF development has contributed substantially to lower demand towards niche and more sophisticated investment funds, including art investment ones.
The second reason for the decreasing demand is of a regulatory nature. Art investment funds need to go through a quite thorough and complex approval process by the relevant regulatory entity. Such a process used to be much simpler in the past. Since the 2008 global economic crisis, regulatory entities have implemented much tighter and complex approval processes with the aim to provide a safer and more controllable investment environment.
Art investments funds are a “niche” category of funds, with average assets under management (“AUM”) between fifty and one hundred million dollars, and never reaching the size of billions AUM of the more traditional, mainstream asset classes (i.e.: private equity, fixed income, etc). Approval and regulatory costs for funds of such a size has a substantial impact on their performance and sustainability.
CA: Would you suggest portfolio diversification through art investing? And if so, for what reasons?
MS: Today’s art market is different from the one we witnessed in the early 2010. Back then, the chance that an investment in art would appreciate in value was higher as a large number of new buyers were entering the market, mostly for investment purposes, causing an increase in demand for artworks and as a result, in their prices. Art can still be an excellent instrument of investment diversification, but the methodology behind the investment must be extremely specific and carefully concerted.
Investors must have clear objectives in mind. For example, they should know ahead of their acquisitions whether they expect to exit the investment in one, five, or ten years. According to the above and to other parameters, investors should expect a specific return and should hence target the right kind of art and specific artists; knowing that every market segment behaves according to its own specific rules.
Courtesy of the artist Thomas Ritz
CA: Would you suggest portfolio diversification through art investing? And if so, for what reasons?
MS: Today’s art market is different from the one we witnessed in the early 2010. Back then, the chance that an investment in art would appreciate in value was higher as a large number of new buyers were entering the market, mostly for investment purposes, causing an increase in demand for artworks and as a result, in their prices. Art can still be an excellent instrument of investment diversification, but the methodology behind the investment must be extremely specific and carefully concerted.
Investors must have clear objectives in mind. For example, they should know ahead of their acquisitions whether they expect to exit the investment in one, five, or ten years. According to the above and to other parameters, investors should expect a specific return and should hence target the right kind of art and specific artists; knowing that every market segment behaves according to its own specific rules.
CA: How do you establish if an artwork has a potential return on investment? To what extent are art indices useful in assessing the risk of investing in an artwork?
MS: The availability of historical data is of utter importance in order to establish the potential return on investment of an artwork. ArtPrice or ArtNet databases provide a quite deep range of information going many years back on a specific artwork. Art databases are a main source of information to forecast return of investment in an artwork. Furthermore, such analysis is applicable to a global market, as it is rarely possible to buy a piece for a substantially lower price, for example in Asia, and resell it in the US market at a substantial premium.
Florian Heinke, But The Gods, credits to Galerie Heike Strelow
CA: Which art category would you suggest acquiring if driven by value appreciation goals?
MS: Contemporary art is the art segment which, at present, is the most liquid and commercial compared to, for instance, Old Masters - which represents a much smaller market segment. Within the Contemporary Art segment, investors can acquire works by valuable up-and-coming artists for ”reasonable” prices, with good expectation regarding the potential future price appreciation.
CA: How do you gain the trust of clients in a market which is known for being highly opaque?
MS: We operate according to the highest level of professionalism for all our services. We provide thorough due diligence services, provenance researches, advisory services for acquisitions or sales and, through our strategic partners, we assist clients on their art logistics needs, including shipping and warehousing services. Specifically for warehousing services, we advise clients on the possibility to benefit from the “free port” storage regime in Switzerland, which allows exemption from tax, import duties and export restrictions.
CA: At which point did Anthea stop being an art investment fund and start to provide more art advisory services? Would you say that clients’ demand is increasing or decreasing?
MS: Anthea never stopped being an art investment fund manager, but in 2015, we decided to offer our bespoke art collection management services to private and institutional collectors. The initial request came from some of our investors who were impressed with the quality and professionalism of the management services we provided to our funds including: valuation, cataloguing, due diligence, and clearly our capacity to source investment opportunities which then turned to be successful.
From there, we created a dedicated Collection Management and Art Advisory department specifically for private collectors, which today represents a relevant part of the Anthea business platform. The clients’ demand has grown stably throughout the years, and some of our clients that used to deal exclusively with auction houses now use Anthea as their preferred advisor.
CA: What are your thoughts on blockchain’s potential applications to art investment?
MS: Great developments are taking place in the world of blockchain and cryptocurrencies and they are certainly going to play a role in the art market as well. Blockchain technology will probably find its space in the art world when this will reach a more advanced state of “dematerialization” -i.e. when artworks made through virtual or augmented reality will gain more relevant consideration (instead of traditional media such as canvas, sculptures, etc.). Blockchain will turn to be key to track provenance of these dematerialized artworks and serve as proof of authenticity. I can imagine in some years collectors buying a virtual reality artwork, registering it through a blockchain and possibly paying through a cryptocurrency, but I doubt this will apply ever to a canvas by Picasso.
Thank you Massimiliano Subba.
Chiara Aluigi,
Contributor, MADE IN BED