Tuesday, October 13, 2015

Carlyle and Banque Pictet Hook Up For Art Financing Action

From the Financial Times, Oct. 7:

Carlyle and Banque Pictet sketch out big returns from art market
Carlyle and Banque Pictet are creating a venture to provide financing to the art market as private equity groups reach into fresh corners of the financial world in their quest to generate high returns. 
Despite the multitrillion-dollar size of the art market, only Sotheby’s and some private banks are in the business of providing loans to collectors, whose art provides debt collateral. Carlyle hopes it can shake-up the economics of the art market, even with the small size of the money being committed. 
The start up, Athena Art Finance, will have $280m in equity capital as well as bank credit lines that will enable Carlyle and Pictet to leverage the equity multiple times. Athena will offer loans of up to 50 per cent of the value of the art from dozens of painters who meet certain criteria. The company will then package the loans and distribute them in the market, taking a profit in the process. 
Carlyle and its partners hope that wealthy families, pension funds and sovereign wealth funds will be attracted by yields that are potentially higher than those in the fixed income market. Many private banks advise clients to keep a portion of their wealth in art, claiming that art can hold its value at times of economic dislocation. While the value of art in the world amounts to trillions of dollars, the size of the art lending market is only about $7bn, according to data Carlyle has collected. 
“We will drive the institutionalisation of this huge market. By introducing more liquidity to the market, we think the cost of capital for these assets will go down and the value will go up,” said Oliver Sarkozy, who is in charge of Carlyle’s latest $1bn Global Financial Services Fund, which is making the investment in Athena. “Leverage generally means asset prices inflate.”...MORE
Blow me a bubble M. Sarkozy.

Previously on Art as a business:

See also our series on Duveen.

And on Pictet, Nov. 13, 2013:
...As noted in one of our Wegelin posts:
...I think that leaves Banque J.P. Hottinguer & Cie's successor-Banque Hottinger & Cie as the oldest or at least the oldest family-owned bank in Switzerland.
Here's the Henokeins Association of most of the world's oldest family businesses, it looks like Hottinguer nudges out Lombard Odier by a decade and Pictet by 19 years.

So now we figure out who sells and who buys.
Swiss Private Bank Pictet Making Money in the Water Biz (XYL; DHR)

And quite a few more.