THINKING OUTSIDE THE BOX – Michael Kanyuchi – takuragallery.com

Posted on January 15, 2012 by Editors

The past years has witnessed the growth of art finance related services.This exciting trend has been a major boost for the art industry, as it has opened the doors to new art collectors.Art was was once considered a hobby of the extremely wealthy , as it was considered to be an illiquid asset with no tangible investment value.Today one need not worry as many banks and financial institutions have joined the bandwagon of art as an asset class,this trend has made art an alternative investment of choice by shrewd investors.The financial institution that pioneer art finance was Citi Private Bank in 1979.

Citi Private was the first bank to offer loans backed by art as collateral, since then other banks has started to offer loans backed by art as collateral.In 2011 former hedge fund manager Michael Steinhardt was given a $40 million loan for a real estate venture backed against his art collection.Other notable innovative financial products is one offered by Art Assure founded by former corporate raider Asher Edelman.Art Assure offers a unique service where it guarantees a sellers price during an auction.In essence Art Assure offers an insurance premium where for a fee of between five to ten percent Art Assure guarantees to pay the seller the full expected price minus its fees if the art-works fails to fetch the expected price, if the art works manages to fetch the expected price the guaranteed price the seller receives the full amount minus Art Assure’s fees.Art Galleries have also joined the art finance bandwagon with some art galleries offering art purchase schemes.One of the most common art purchase schemes is an art collector pays a deposit which is normally 1/3 of the value of the art-works and is given three to six months to complete the purchase.The interest rates under these purchase schemes are usually quite low and vary between one to two percent.As art becomes a major investment option more art finance related products and services are set to grow as financial institutions and players in the art industry become more innovative.