Economics Market United Kingdom

Art fund calls for greater transparency

Founder of Tiroche DeLeon collection says increased openness will attract wider interest

Ai Weiwei’s installation Forever, 2003, incorporating 42 bicycles, is described in Tiroche DeLeon’s newsletter as the art fund’s “most ambitious acquisition to date”. It was bought in April 2011, for the equivalent of $805,000, four months after the artist’s notorious arrest by the Chinese authorities. The work is currently on loan to the touring exhibition “Ai Weiwei: According to What” (at the Indianapolis Museum of Art until 21 July; then the Art Gallery of Toronto, 17 August to 27 October). In February 2012, Sotheby’s valued the work at $1.5m

Serge Tiroche, the co-founder of an art fund that acquires contemporary art from developing markets, says he is trying to bring a level of transparency to the art market in order to enable “a broader range of investors” to come in. Art funds have, to date, suffered the twin pressures of depressing art prices since a 2008 peak and concerns from investors in more mainstream alternative assets (such as gold, property and private equity) that the art market is too opaque.

By the end of 2008, an estimated 40% of around 50 art funds collapsed, according to data from the Fine Art Wealth Management consultancy. ArtPlus, a previous fund that Tiroche launched with his brother Micky, was one victim of the 2008-2009 art market crash. Since this time, such businesses—which pool investors’ funds to acquire art—have begun to re-emerge, but most of the growth has been in China, where the economy is growing and regulation of such funds is still playing catch-up.

Tiroche’s new fund, the Tiroche DeLeon collection, began purchasing in 2011 and currently has 250 works on its books worth a total of $14.3m. The fund opened to outside investors (with a minimum of $500,000) earlier this year. Its focus is on what it calls “contemporary masterpieces from developing markets”, namely artists who have a track record locally, with some exhibition history, but are yet to have a fully-fledged international presence. It is here, says Tiroche, who also worked in private banking at Citigroup for ten years, that there is the greatest “price arbitrage”. He says this is even the case at the top-end: “Look at the difference [in valuation] between artists of the same stature in the West and in developing markets. The best work by Subodh Gupta [based in India] is worth around $500,000; by a Western artist, this can go up to $20m.” Artists in the fund’s collection include Ai Weiwei (from China and the fund’s largest single artist concentration), Mona Hatoum (Lebanon) and El Anatsui (Ghana).

However, the fund’s key distinction is its founders’ transparent approach to what has been a very veiled industry. We know from its website, for example, that at the end of 2012, the collection was valued independently to be up 2.76% (net) over the year (the art market as a whole was down 3.4% in 2012, according to the Mei Moses All Art Index). Such data is not readily available for most art funds. “We want to change the industry from within,” says Tiroche.

All activity, all the time

Every work that the fund acquires is posted on its website (www.tirochedeleon.com), any sales from the fund are also reported and, Tiroche says, “people who follow our Facebook page, website and newsletters can see my activity almost live. [What] part of the world I am in, what artists I buy, what fairs, museums, studios, biennials I visit.” Works that the fund lends to museum exhibitions—another core plank of its strategy—are also clearly identified.

Its a strategy that plays to the increasingly stringent needs of key potential investors, such as family offices, private banks and pension funds. In its 2012 report on the industry, the Fine Art Wealth Management consultancy finds that: “The trend is towards an increased focus of operational due diligence and risk management policies.” Such sentiments were echoed at a conference hosted by the financial firm Deloitte in Maastricht in March, at which Jeremy Eckstein, the managing director of ArtBanc International, said that “so many investors in conventional assets have had their fingers burned—and they are even more worried about art.”

But even Tiroche cannot be as open as he had originally intended. As from 2013, information on works acquired will no longer include what they cost and therefore individual investment returns per work will not be available. “That is the only bit of information that we have decided to keep confidential, in order to protect the interests of the artists and galleries,” he says.


Serge Tiroche, with the artist Ai Weiwei, still believes art funds can work
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