Advising clients on art is both an important specialism for private banks such as Citi but also an excellent way to work out what makes people "tick".

Does
a Picasso float your boat if you have deep enough pockets to afford one
of his pictures? Do you prefer a Dutch Old Master or the latest shocker
from Damien Hirst?

There are few areas of private client management where the
conversation is as personal and revealing as an individual’s artwork
choices. And the business of advising high net worth individuals on
collections and acquisitions continues to be an important service
offering for some banks.

Over at Citi Private Bank, which has been in the art advisory
business since the late 1970s, the firm argues that guiding clients
through the maze of the art world is a task that gives a firm an
unrivalled opportunity to see what makes a client “tick”. This is also
very useful for when a bank wants to find out about a client’s broader
investment tolerances and appetites.

Despite concerns about whether the pace of art price growth is
sustainable - this market saw a big correction in the early 1990s - the
burgeoning wealth of regions such as Asia, and the appeal of art for its
“hard asset” qualities amid economic jitters, keeps the market in
robust shape, Suzanne Gyorgy, global head, art advisory service, Citi
Private Bank, told this publication in a recent interview.

“The amount of press and attention on art as an asset class has exploded,” she said.

That rise in attention does not automatically denote a one-way price
trend, however. According to the Mei Moses World All Art Index, a
barometer of art auction prices produced by the wonderfully-named
Beautiful Asset Advisors in the US, the index showed a year-to-date dip
in December 2012 of 3.28 per cent, and lagged broad equity market
indices last year. (The MSCI World Index of developed countries’ shares
logged total returns of more than 15.8 per cent in 2012.)  However, in
2011, the Mei Moses All Art Index rose by 10.2 per cent.

Citi is not the only private bank and private client business that
advises on art, although this US bank is one of the most
long-established in a specialist field. Other firms that provide art
advisory (not all firms are strictly comparable) include Emirates NBD
(it announced a move into the area two years ago); Societe Generale;
Withers, the law firm; Deutsche Bank (which boasts a substantial art
collection of its own); Butterfield Private Bank and BSI Bank.
Meanwhile, there are a cluster of art advisory boutiques and specialist
firms working in this area. Randall Willette, an experienced figure in
this field, heads Fine Art Wealth Management, for example, and is a
member of WealthBriefing’s editorial advisory board (sister publication to this website). 

Rising interest

As recounted regularly by this publication, interest in art as an
asset class has developed for different reasons in recent years; even
during the depths of the 2008 credit crunch crisis, the market did not
suffer unduly, Gyorgy said. However, she also noted that after some
initial hectic price activity, there are signs of growing maturity in
markets such as Asia, which she sees as a welcome development.

“In the Asian market, auction activity has slowed, which, I think
that is a positive thing as they [Asians] are moving from a trading
mentality to a more discerning, connoisseur mentality,” she said. “Even
though some art [turnover] volumes have dropped, there is a base for
building a stronger market and one not as frothy as in the past,” she
said.

The impact of buyers from Asia, among other regions, on established
art markets in the West continues to generate attention. At Sotheby's
evening sale of Impressionist and modern art in early February, an Asian
reportedly won the house's most-expensive artwork, Picasso's $45
million Woman Sitting Near a Window. (Source: Wall Street Journal.)

All the fun of the fair

Gyorgy spoke ahead of the Art13 London art fair event, running from 1
to 3 March, of which Citi Private Bank is the sponsor. As part of the
event – and announced this week – there is an invitation-only “private
museum summit”, bringing together collectors and other “tastemakers”
from the West and East. Citi says the art fair will be the biggest to
launch in London for a decade.

At the Art13 London event, Asian, North American, South American and
European private museum owners will gather, with the idea of building a
network among such institutions. The “summit” happens a few days before
the main art fair, on 28 February, chaired by Philip Dodd, the
broadcaster and chair of the Art13 London international advisory board.
The closed-door event features more than 30 participants.

This sort of international event excites Gyorgy, who says Citi
Private Bank’s clients will revel in the opportunity to meet experts in
this field.

Art fairs, as well as being enjoyable feasts of great art, taking
place in many cities, are tremendous networking opportunities – a point
not lost on the likes of Citi Private Bank.

Family

One feature that Gyorgy notes is that the bank sometimes will find
itself handling the affairs of more than one generation in a family
where art collection is an issue.

“In the case of some clients that we are working with, now it is that we are working with their children,” she said.

So what do people like? 

In the US and Europe, there has been a strong demand for post-1945
art works, she said. “A lot of people are collecting that,” she said,
referring to the Baby Boomer generation. “With the wealth that has been
created, this will continue,” she said.

“There is [also] more contemporary art out there being made and that
is always going to interest people,” she said, referring to
entrepreneurs looking for “dynamic” artforms that reflect their values.

At Citi, its art unit comprises two main elements: art finance (the
use of art as collateral to finance other art purchases or for other
purposes), and art advisory, (collecting, storage, logistics, due
diligence checks and provenance.)

One thing is certain. Even though art may not always perform as
strongly as an asset class as, say, the S&P 500 or a high-octane
hedge fund, the products are a lot more interesting to look at.