Editor’s Letter

Last year Abraaj, a Dubai-based private equity fund with a preference for emerging markets, went into administration. Poor returns from a number of investments spiralled until investors called the fund out over its misuse of a $1 billion healthcare fund.

Administrators were quick to flog its assets. Among them, a collection of Middle Eastern and Asian art, which was sold at auction for $5.8 million last year.

While the sale went some way to reaping back investor money, their emotions were mixed. Why was a fund manager loosing so much money and yet spending big on art?

Clients might ask the same question of Deutsche Bank, which holds one of the world’s largest corporate art collections, snippets of which can be seen in this edition of our digital magazine. The German bank has been mired in controversy since 2014 when it posted a huge loss. Only last year did it claw back into the black, but questions were surely asked: Are artworks necessary assets for loss-making firms.

But that is a short-sighted view. High net worth clients regularly invest in art, riding the volatility of the market, so are reassured when their bank or wealth manager does so too.

Research from March’s Knight Frank Wealth Report shows that 28% of UHNWIs around the world “actively collect an investment of passion”.

When researchers from the Wealth Report asked 600 private bankers and wealth advisors “are more of your clients starting to collect investment of passion?” 39% said “yes”.

And why wouldn’t they? The value of art has increased 9% in the last year, according to the Report. That’s considerably better than either the S&P 500 or FTSE 100.

Another advantage of corporate art collections is that it can be used to fill headquarters or branches. These premises still matter: Our feature on Singapore’s newly opened branches shows that wealthier clients still value personal advise and are willing to go to a branch to receive it.

As the front room of a firm, it is important that these branches reflect the style of the company, both in amenities and art.

Judgement on the art hanging on their walls should be restrained, however, for there is another reason that companies should collect. Supporting the arts is an imporrtant philanthropic undertaking.

This support can be a lifeline to young artists. Kleinwort Hambros offers its Emerging Artist Prize to British artists under the age of 35. In Canada, RBC runs the Canadian Painting Competitions and also supports Canadian Art, a promotional body.

Some have deep routed commitments to the arts. BNY Mellon is one of the main sponsors of London’s Royal Academy of Arts in its 250^th anniversary year. Also in London, Deutsche Bank sponsors the Tate and Credit Suisse the National Gallery.

But smaller firms are often the most passionate. J Stern & Co., a family office, recently sponsored the ‘Lost Treasures of Strawberry Hill’, which featured masterpieces from Horace Walpole’s collection.

Here, the connection was personal. “Strawberry Hill used to be the home of Horace Walpole, the son of the first prime minister”, Jérôme Stern, the co-founder of J Stern & Co. told me. “An ancestor of mine bought it in 1883 and sold it 1923.

“It was great because it covered our education [philanthropy]. Secondly, it covers the arts. And then it also had the family aspect which was nice.”

Oliver Williams

Editor, Private Banker International