Art Funds: From black-box to full-transparency. Serge…

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In Primo Piano

Art Funds: From black-box to full-transparency. Serge Tiroche's strategy, co-founder with Russ DeLeon of Art Vantage PCC Limited

  • –by Maria Adelaide Marchesoni

Art patron and former private banker Serge Tiroche and entrepreneur Russ DeLeon explain how they have turned the privately owned Tiroche DeLeon Collection into the first socially responsible art fund seeking participation from private and institutional investors.
How did you become an investment fund?
Russ DeLeon and I founded a new company, Art Vantage Ltd, in early 2011 in order to build an investment collection. Soon we were getting inquiries from friends about our extensive travels and collection strategy. 15 months later we decided to change the company into an experienced investor fund, Art Vantage PCC Limited, in order to allow people with similar interests to join us.
How many clients do you represent?
At the moment we are 5 investors.
How much will you invest in the next months?
We are currently fully invested and have close to 300 works which can be seen on our state-of-the-art website . How much we invest in the future is dependent on how many investors join us, but our intention is to increase our collection from the current $17 million value to at least $50 million within 3 years.
How do you select the art works you buy? The most and the less expensive art work in the portfolio?
We undertake extensive travel and do thorough research on the artists we acquire. We work with the best galleries in every region and get their proposals on an ongoing basis. Our advisory board is another valuable source of information. There are numerous criteria that drive a purchase decision but we will always seek to buy the best possible work by the artist, and sometimes that means large scale Museum quality works. We have many that fit that category, which is something that makes our collection quite unique, and allows us to become a favorite lender to Museums and Biennials around the world. Our acquisition price range is between $10'000 to $1 million. Our most expensive work is currently valued at $1.8 million.
How long does it take to raise capital for a single art investment?
This is an ongoing process and not dependent on any single work. Any investor that invests becomes a partner in the entire collection. The beauty is that each investor can study the collection online and decide if he/she wants to be a part owner of it. Also quite interesting is the fact the the investor who joins invests at a Net Asset Value which is determined by external auction house valuations, which are generally quite conservative. The works we sold from the collection in the past 3 years were realized at an average premium of 24% to the book value, which makes it quite an attractive proposition for new investors.
How do you intend to sell?
We sell through private transactions as well as via auction. Our sales are very targeted and are often driven by opportunistic strategies or upgrade possibilities. Our investment strategy combines long term market exposure to what we consider a very undervalued part of the art world, as well as an active element that seeks to benefit investors from our in depth expertise and extensive global network.
How do you organise artworks loans?
Loans are often suggested by the artists themselves or their galleries as they know we have some of their best works and are very interested in lending to top institutions. In some instances we are the ones to initiate loans via our ongoing collaboration with a number of curators. The borrowing institution always assumes the full costs of shipping, insurance and storage, so this is a cost saving for the collection but more importantly a way to share the works with the public, increase awareness of our brand, build value for the works themselves as well as for the overall collection.
How many people work in your team?
Our team is listed on the website. We are currently 8 people on the team, 4 of which are full-time.
Why there is lack of confidence about investing in art?
This is a critical issue and it is our mission to change this perception. Funds before us have generally operated as black boxes where very little information was available even to existing investors. The art world is a complex place to invest, and being 'in the know' is critical. Investors understand this and therefore want certainty that the fund managers are not conflicted. We are the first fund to provide full transparency not only to investors, but to the general public. Everything we own is available with full details on the website, we also manage an active facebook (Tiroche DeLeon Collection) and send "Insight", our quarterly newsletters which anyone can subscribe to on our website or facebook, where people can read about my travels and activities and obtain market reports. We also publish financial data on a regular basis and make our financial reports available on request. The founders of the collection have invested the first $10 million which are locked to maturity and have a strict non-compete agreement with the fund.
What are the risks in the art market?
The risks in the market are primarily for novice investors who may not be aware of the internal workings of the market and rely too much on media. The media enhances the bubble effect around certain artists that become very fashionable very quickly and see their prices soar in a very short space of time. But usually these hypes don't withstand the test of time and by the time a novice investor wants to sell the hype is over and the prices have come back to reasonable levels. These pockets of 'high octane' art are very risky to navigate and even we, so to speak 'experts', try to avoid them. Outside that, the overall macro story in Contemporary Art is intact. This market will continue to grow, fueled by new wealth created in the past 2 decades by a generation that is interested more and more by artists of their time. With an ever growing proportion of the new wealth coming from emerging economies, we believe that owning the best contemporary works by artists from those markets is the best long term strategy.

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