ABN AMRO is in preliminary discussions to set up its first art fund, said sources involved in the process, writes Holly Parmenter.
It is understood the Dutch private banking arm is in talks with controversial art guru Thomas Krens, the previous head of the Guggenheim, about setting up a substantial fund to cater for increased client demand in the sector.
This would be ABN AMRO’s second attempt at setting up an art fund. In 2005 ABN AMRO announced its intent to create an ‘umbrella’ art investment fund. The ‘fund of art funds’ was to be made up of investments in other art funds.
The bank pulled out of its decision due to the lack of active funds at the time. Shortly after this, Ariel Salama, managing director of the art investment fund and global head of private banking, left the firm.
This would also be the first fund set up by Thomas Krens whose history is mainly as a museum curator.
Meanwhile one source added that UBS are currently in talks with Simon de Pury, the previous owner of auction house Phillips de Pury & Company, about setting up a similar venture. The source remained tight lipped about timing and scale of the fund.
Art expert and founder of the Art Fund Group, Philip Hoffman, said banks are ‘risking their client’s capital’ when it comes to setting up art funds as they don’t have the experience or the dedicated team to reap the rewards.
The Art Fund Group has a 45 strong team made up of global art experts and is understood to be unrivalled in the industry, according to Hoffman.
He believes that banks simply do not have the ‘track record’ or ‘infrastructure’ to successfully set up art funds.
Contrary to Hoffman’s comments Berenberg is currently the only bank in Europe to hold a successful art fund of 50 million euros.
Art funds began appearing ten years ago but have had limited success in developed markets compared to emerging markets.
Discussing the recent demand for art Hoffman said:
"I see it as a low correlated asset class, not necessarily uncorrelated, but low correlated and so the principle reason is returns and diversification."
"It’s a very interesting inflation hedge; a lot of people are underinvested in art. There is a massive overhang of demand and there is a shortage of supply," he added.
Since art prices at the top end of the market have continued to stay, helped by strong demand from China, many investors view these tangible assets as having guaranteed returns.
AMB AMRO and UBS declined to comment.