The Financial Times has important news that may mark a turning point in the art market. Carlyle’s Olivier Sarkozy is launching an art financing firm, Athena, that will offer loans against art as an asset. This will be the first firm to provide loans in the art market that is founded by two mainstream financial firms, Carlyle and Switzerland’s Pictet.
Many private banks provide loans against art but they combine those loans with security from borrowers other assets. So Athena offers the potential for greater liquidity in the art market:
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.”
Update: Athena has now issued their press release:
“The $3 trillion-plus global art market is one of the least developed and least financially sophisticated market of substantial size in the world,’’ said Mr. Sarkozy. “Athena’s substantial resources and relevant expertise bring a professionalized financial services approach to this underserved market.’’
Athena will offer 6-month to 7-year loans of at least $1 million at competitive rates, enabling clients to leverage their art without pledging their other personal assets. The firm seeks to distinguish itself by not aiming to sell or take an ownership interest in any of the works backing its loans.
“For too long serious art collectors and other market participants have been faced with limited choices when they want to borrow against art,’’ said Athena CEO Andrea. Danese, who brings more than 20 years of experience in structured finance and financial technology to Carlyle’s investment expertise. “We aim to be an independent, trustworthy and flexible source of financing for the art market.’’
Athena expects to provide additional flexibility to financial advisors, estate planners, lawyers and other professionals who may now manage their clients’ collections as rationally as the rest of their asset portfolio.
Athena will allow collectors to retain ownership of their artworks, enabling them to make other investments or finance unexpected expenses while simultaneously protecting the rest of their assets. “The resulting increased liquidity for our clients will improve the art market’s transparency and efficiency,’’ said Mr. Danese. “We are unlocking collectors’ personal balance sheets in a thoughtful way and giving them reliable flexibility as they manage their cherished art collections.”
Carlyle and Banque Pictet sketch out big returns from art market (FT.com)