With the recent launch by Societe Generale Asset Management Alternative Investments (SGAM AI) of an investment fund dedicated entirely to the art market, SGAM becomes the first globally recognised asset manager to see the merits of art in strategic portfolio diversification by offering institutional and private investors a financial placement with art as the underlying.
With the recent launch by Societe Generale Asset Management
Alternative Investments (SGAM AI) of an investment fund dedicated
entirely to the art market, SGAM becomes the first globally
recognised asset manager to see the merits of art in strategic
portfolio diversification by offering institutional and private
investors a financial placement with art as the underlying.
While not the first such fund to recently come to market, SGAM
stands out among all the others given its importance as a leading
global asset manager and part of one of the largest financial
service groups in the euro zone.
RW: Olivier, we are aware that many private
clients are art lovers, own collections or buy and sell in the
art market. But why has SGAM Alternative Investments decided to
launch an art investment fund?
OM: Our team has always been attracted to new
product ideas and unconventional asset classes. SGAM AI first
launched its private equity platform in 1999 and currently
offers a comprehensive range of funds including Islamic
compliant funds and private equity funds focused on specific
regions. We have also developed funds around specific themes
including fine wines, olive oil production and biotechnologies.
For a long time, the prospect of a fund invested in art was
tempting to us. We already viewed art as an asset class, even
if it had numerous inefficiencies. About three years ago, we
started to structure this fund and what you see today is the
result of a long maturation process.
RW: Historically, very few major collectors
and art market professionals have endorsed art as an
investment. The general view was that one should get involved
in art only if you love the subject and are passionate about
what you are buying. Who are the target investors for your art
fund?
OM: Our investors are high net worth
individuals and institutional investors who are looking to
offer their private clients a financial placement with the art
market as the underlying for the purpose of strategic portfolio
diversification. We have access to a broad range of both
private and institutional investors.
RW: What is the structure of the fund?
OM: Given that our investor base is
international, our fund is a Luxembourg based SIF (Specialised
Investment Fund). The fund was submitted to a rigorous due
diligence process and regulations to reassure investors.
RW: I understand the fund resembles a private
equity fund in that the end goal is asset appreciation through
active management. Is this correct?
OM: Yes, the fund has the structure of a
private equity fund and will rely on strategic partnerships
with an international and exclusive network of art consultants,
dealers and auction houses to create value and make a profit.
We are aiming for a rate of return of 15 per cent – 20 per cent
net per year over an eight year period. Similar to private
equity there is a deal sourcing phase where we select five per
cent of what is proposed. This is followed by a due-diligence
and monitoring phase during which the fund seeks to add value
through promotion, exhibition and loaning the works of art.
Finally, there is an exit phase when the art works will be
sold. We intend to hold the works on average two to four years.
RW: What expertise does SGAM AI have in art?
OM: We have established two consultative
committees. One artistic committee composed of high level art
experts and one dealer committee composed of a number of
leading art dealers. The members of both committees have access
to an extensive network of art market insiders with the ability
to source art investments at favourable terms through
dis-intermediation. We also intend to use the worldwide network
of SocGen customers during the sourcing phase.
RW: What kind of art will the fund invest in?
OM: The fund will invest in 20th century and
21st century works of art. The selection criteria for these
works will be approved by an art committee composed of
international curators, historians and large private
collectors, internationally recognised for their integrity.
Members of this committee will include such names as Jean
Manual Bonet, former director of the Valencia Institute of
Modern Art and the National Museum of Art Reina Sofia in
Madrid, and Helene Kelmachter, curator of the Cartier
foundation for Contemporary Art.
RW: What is the target size of the fund and
what is the minimum subscription amount?
OM: Our initial target is €50 million and we
are well on track to achieving this. We intend to double this
size by next year. The minimum subscription is €125,000.
RW: You mentioned that your art fund resembles
a private equity fund model, and yet it seems that much of the
current market is being driven by short term arbitrage
opportunities, particularly in contemporary art. Would you
agree with this?
OM: Yes, there are certain advantages to this
strategy and we intend to invest in art works both for long
term capital appreciation and short term arbitrage where there
are specific opportunities for out-performance. However, our
aim is to develop relationships with important market players
and art professionals over the long term to provide investors
with compelling opportunities formerly only available to art
market insiders.
