Fine Art and High Finance E-Book

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Bloomberg
• Sprache: Englisch

Seitenzahl: 599

Veröffentlichungsjahr: 2010

Beschreibung

Art and finance coalesce in the elite world of fine art collecting and investing. Investors and collectors can't protect and profit from their collections without grappling with a range of complex issues like risk, insurance, restoration, and conservation. They require intimate knowledge not only of art but also of finance. Clare McAndrew and a highly qualified team of contributors explain the most difficult financial matters facing art investors. Key topics include: * Appraisal and valuation * Art as loan collateral * Securitization and taxation * Investing in art funds * Insurance * The black-market art trade Clare McAndrew has a PhD in economics and is the author of The Art Economy. She is considered a leading expert on the economics of art ownership.

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

About the Editor

Acknowledgements

About the Contributors

Chapter 1 - An Introduction to Art and Finance

The Art Market: A Brief Modern History

The Current Structure of the Art Market

Art Market Participants

Art as a Financial Asset

Art and Economics

Art as an Investment

Looking Forward

Chapter 2 - Art Appraisals, Prices, and Valuations

Art Appraisals

Determining Art Prices: Objective and Subjective Valuations

Chapter 3 - Art Price Indices

Art Price Indices

Art Price Databases

Art Market Performance

Art and the Economy

Chapter 4 - Art Risk

Risk Basics

Art Price Risk

Appendix Pricing Art Credit Default Swaps

Chapter 5 - Art Banking

The Origins of Art Finance

Motivations for Art-Based Lending

Chapter 6 - Art Funds

Art Funds as Asset Class

Art Funds: Current Strategies and Practices

Chapter 7 - The Government and the Art Trade

Trade and the Market for Works of Art

The U.S. Government and the Art Market

Government and Art Market Relations: A British Perspective

Chapter 8 - Insurance and the Art Market

The Origins of Art Insurance

Financial Monitoring of Insurance Companies

Reinsurance

Art Insurance

Chapter 9 - Art and Taxation in the United States

Defining Your Role for Taxation Purposes

Establishing Your Motive for Buying Art

Insurance and Taxation

Sales Taxes and Use Taxes

Art Advisory Services’ Tax Liability

The Concept of “Fair Market Value”

IRS Valuation Procedures

Determining a “Comparable Market”: Rulings on Four Cases

Blockage Discounts: When Excess Supply Depresses Value

Auction House Premium

Inter Vivos (During Your Lifetime) Charitable Transfers

Charitable-Deduction Limitations

Partial Lifetime Charitable Transfers

Substantial Physical Possession

Contributions of Fractional Interest in a Work of Art

Example of IRS Exception re: the Fractional-Interest Rule

Charitable Remainder Trusts

When Art Appreciation Is Disproportionate to Other Assets’ Appreciation

The Marital Tax Deduction

Noncharitable Transfers

Inter Vivos Transfers

Chapter 10 - Art and Taxation in the United Kingdom and Beyond

U.K. Tax Regime

Direct Taxes

Indirect Tax: Value-Added Tax

Wealth Taxes

Chapter 11 - Art Conservation and Restoration

Distinguishing Among Conservation, Restoration, and Preservation

Art Conservators and Restorers

Preserving Your Investment—The Basics

Summary of Considerations for Art Conservation

Chapter 12 - The Illegal Art Trade

Recovering Stolen Art: Whose Is It?

Purchasing Art: Ensuring Authenticity and Avoiding Forgeries

The Authenticity Is Suspect: What Now?

Provenance Problems: How to Protect Your Investment

Art Theft and Museums

The Illegal Art Trade: List of Legal Cases Cited

Index

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Library of Congress Cataloging-in-Publication Data

Includes bibliographical references and index.

Summary: “Art investors and collectors can’t protect and profit from their collections without grappling with a range of complex financial issues like risk, insurance, restoration, and conservation. In Fine Art and High Finance, Clare McAndrew and a highly qualified team of contributors explain the most difficult financial matters facing art investors”-Provided by publisher.

ISBN 978-1-57660-333-8 (alk. paper)

1. Art as an investment. I. McAndrew, Clare.

N8600.F56 2010

332.63-dc22 2009047843

This book is dedicated to my son, Kane, whose wonderful and timely arrival spurred on its completion.

About the Editor

Dr. Clare McAndrew is a cultural economist, investment analyst, and author. She founded Arts Economics in 2005. Arts Economics is a research and consulting firm focused exclusively on the art economy. The company carries out bespoke research and analysis on all aspects of the fine and decorative art market for private and institutional clients.

Dr. McAndrew completed her PhD in economics at Trinity College Dublin in 2001, where she also lectured and taught economics for four years. She then directed a number of research projects for the Arts Council of England on the effects of regulation, taxation, and other issues in the visual arts market.

In 2002, Dr. McAndrew joined the U.S. firm Kusin & Company, a boutique investment banking firm specializing in art investment, as chief economist. After three years in the United States, she returned to Europe in 2005, and continued her work in the art market in a private consulting capacity for a global client base. She set up Arts Economics to focus her efforts on art market research and analysis and works with a network of private consultants and academic scholars in providing research and consulting services to the global art trade and financial sector. Some of the main strands of research currently include macroeconomic art market and micro-level sector analysis, art banking, and investment-related services. The company also specializes in the analysis of arts-related policy and regulation for private- and public-sector bodies. Dr. McAndrew has published widely on the economics of the art market, including two recent books: Globalisation and the Art Market, commissioned by the European Fine Art Foundation, and The Art Economy, published by Liffey Press.

Dr. McAndrew is a guest lecturer in the masters program at Trinity College Dublin in the Trinity Irish Art Research Centre (TIARC) and is an associate lecturer at Sotheby’s Institute of Art, Singapore. She also lectures Business Studies for Artists at the National College of Art and Design (NCAD) in Dublin. She lives in Dublin, with her husband and son.

Web: www.artseconomics.comE-mail: [email protected]

Acknowledgments

I would like to thank all of the contributors for their time, hard work, and expertise in putting the chapters of this book together. I would especially like to thank Andy Augenblick for his thoughts and advice at the start of the project. Thanks are also due to Veronica McDavid for work in the early stages of the book, and also to all of the editors at Bloomberg, particularly Evan Burton.

About the Contributors

Anthony Browne is chairman of the British Art Market Federation (BAMF). Founded in 1996, BAMF represents the interests of art dealing and auctioneering companies in the United Kingdom in their contact with government. He is a graduate (MA, Modern History) of Oxford University. He was a director of Christie’s, London (1978-1996) and a member of the British Government’s Cultural Industries Export Advisory Group (1998- 2001); Ministerial Advisory Panel on Illicit Trade (1999-2003); Quinquennial Review Panel on the Reviewing Committee on the Export of Works of Art (2001-2003); and Advisory Group on Museum Acquisitions (Goodison Review) (2003). Mr. Browne is a board member of the European Fine Art Foundation (TEFAF) and consultant to Christie’s International PLC. He has written numerous articles on political aspects of the art market.

Dr. Rachel Campbell completed her PhD in Risk Management in International Financial Markets at Erasmus University, Rotterdam, in 2001. She is currently an assistant professor of finance at both Tilburg University and the University of Maastricht. Her work has been published in a number of leading journals, including the Journal of International Money and Finance, Journal of Banking and Finance, Financial Analysts Journal, Journal of Portfolio Management, Journal of Empirical Finance, Journal of Risk, and Derivatives Weekly. Dr. Campbell teaches at Tias Business School and Euromoney Financial Training on art investment and works as an independent economic adviser for The Fine Art Fund in London, and for Fine Art Wealth Management, U.K. She is also a risk consultant for Emotional Assets Management & Research.

Charles T. Danziger and Thomas C. Danziger are brothers and partners in the New York City law firm of Danziger, Danziger & Muro, specializing in art law. They are the authors of the widely read “Brothers-in-Law” column, which appears regularly in Art + Auction magazine, and to date have published almost fifty articles dealing with legal issues in the art world.

Thomas Danziger graduated from Wesleyan University with honors in General Scholarship and from the New York University School of Law, where he was an editor of the Journal of International Law and Politics. Prior to founding Danziger, Danziger & Muro, he practiced law with Shearman & Sterling in New York. Mr. Danziger specializes in art-related transactions, and advises collectors, dealers, museums, and artists in this field. He is fluent in French, and lives in New York City with his wife, Laura, and young son, James. He may be reached via e-mail: thomas@ danziger.com.

Charles Danziger graduated from Yale University, magna cum laude, and the New York University School of Law, where he was also an editor of the Journal of International Law and Politics. Mr. Danziger was formerly associated with Milbank, Tweed, Hadley & McCloy; Nagashima, Ohno & Tsunematsu, in Tokyo; and the Museum of Modern Art in New York, where he served as assistant general counsel. He wrote and illustrated Japan for Starters, a book about Japanese modern life, business, and tradition; and Harvey and Etsuko’s Manga Guide to Japan. He is a trustee of designer Issey Miyake’s Miyake Design Foundation and violinist Midori’s Partners in Performance. He has lectured on art law at the University of Chicago Law School and at Tokyo University and Keio University in Japan. Mr. Danziger is fluent in Japanese, German, and French. He may be reached via e-mail: [email protected].

Jeremy Eckstein studied third-level math, statistics, and economics and started his career training to be an actuary. He joined Sotheby’s in 1979 to provide support to the Trustees of the British Rail Pension Fund following their decision to diversify part of their investment portfolio into art. During his tenure there as head of research, he developed Sotheby’s Index of art prices, contributed regularly to Barron’s and Forbes on the state of the market and created Sotheby’s Art Market Bulletin. He left the company in 1990 to work as a self-employed consultant. In recent years Mr. Eckstein has worked closely with dealers and independent advisers, developing solutions for investment clients. He undertakes the regular members’ surveys on behalf of the Society of London Art Dealers (SLAD) and has recently had published research on the economic impact of art fairs commissioned by TEFAF. He advises on asset allocation strategy involving art for high-net-worth individuals and also acted as adviser to a number of embryo art funds. In 2004, he was a member of the team of independent experts assembled by ABN Amro to evaluate a fund of funds based on art funds. He currently lectures on art and business for Sotheby’s Institute in London as well as for the Institut d’Études Supérieures des Arts (IESA) in Paris.

Christiane Fischer was named chief executive officer of AXA Art Insurance Corporation in January 2004 and its president in June 2006. Prior to that, she served as chief operating officer and director of communications. Before joining AXA Art in January 2000, she served as general manager of corporate information and reporting at Daimler-Benz North America Corporation in New York. Ms. Fischer started her professional career in the Customer Service Department of Bank of America in Frankfurt, then she worked in the Finance Department of Daimler-Benz in Stuttgart before moving to America. Ms. Fischer was born and raised in Germany. After receiving her Abitur, she completed a program as Foreign Language Correspondent, with a focus on industry and commerce. In addition to her studies in Germany, she studied economics and marketing at New York University.

Ms. Fischer currently serves as president of the Art Resource Alliance (ARA), a not-for-profit organization whose mission is to foster the preservation of cultural heritage through education, with special focus on the fine and decorative arts. Fischer also serves as a member of the board of trustees of the Isamu Noguchi Museum and the International Foundation for Art Research (IFAR) and on the advisory boards of the Chicago Conservation Center and the Appraisers Association of America. In addition, she is a member of the International Council of the Miami Art Museum. Ms. Fischer lives in New York with her husband and their three daughters.

Jill Arnold joined AXA Art Insurance Corporation in October 2008 as director of business development. Before joining AXA Art, she was a client advocate at Willis of New York and a director at DeWitt Stern Group in New York City. She started her professional career at Chubb Group of Insurance. Ms. Arnold has written articles for Fine Art Connoisseur Magazine and has lectured at Art Chicago, the Sotheby’s Institute, and Franklin & Marshall College. She was born in Lancaster, Pennsylvania, and is a graduate of Franklin & Marshall College where she studied Classics and Art History. She currently serves as president of the National Association of Insurance in New York City and is on the Advisory Council for the Appraisers Association of America.

Rachel Goodman holds a BA in Art History and Communications from the University of Pennsylvania, from which she graduated magna cum laude. She has also completed coursework at University College London. She currently works in the president’s office at Gurr Johns, New York. Previously she worked at Andrea Meislin Gallery, New York and the Jewish Museum, New York. Her interests lie in the intersection between art and economics.

Suzanne Gyorgy is a senior vice president of the Citi Private Bank Art Advisory Service and the art finance director. She is also the business manager of the group, overseeing all aspects of its day-to-day operations. Before joining the Art Advisory Service, she was director of exhibitions and collections for the Morris Museum, director of the PaineWebber (UBS) Gallery in New York, and a registrar at the Museum of Modern Art. Ms. Gyorgy’s experience includes organizing exhibitions, establishing public-relations campaigns, fundraising, developing educational programs, and managing numerous private and corporate art collections. She earned a degree in fine art from Pratt Institute.

Elizabeth von Habsburg is president of Gurr Johns, Inc., the largest independent international art consulting and appraisal firm in the United States and Europe. She is a board member of the Appraisers Association of America, New York; the Appraisal Foundation, Washington D.C.; and the Albert Kunstadter Family Foundation and is also a member of ArtTable, a fellow of the Pierpont Morgan Library, and on an advisory committee for the Museum of Art & Design, New York. Prior to joining Gurr Johns, Elizabeth worked at Christie’s, New York. She has a BA from Stanford University and an MA from Columbia University. She has edited four antiques price guidebooks, lectured extensively throughout the United States, and acted as expert witness in the courts of New York, Florida, and Texas.

Rachel Goodman holds a BA in Art History and Communications from the University of Pennsylvania, from which she graduated magna cum laude. She has also completed coursework at University College London. She currently works in the president’s office at Gurr Johns, New York. Previously she worked at Andrea Meislin Gallery, New York and the Jewish Museum, New York. Her interests lie in the intersection between art and economics.

John K. Jacobs is the founder and president of Artex Fine Art Services. Mr. Jacobs has been involved in the safe handling, transport, packing, crating and storage of museum artifacts for almost thirty years. After completing postgraduate degrees in sculpture, he began working in museums in 1980 as registrar of the New Museum of Contemporary Art in New York City. He was responsible for managing traveling exhibitions and site-specific installations and was integrally involved in the expansion of the museum in 1983 to its new headquarters in Soho.

In 1986 he left to head up the International Services and Crating and Packing Department at Crozier Fine Arts. During his tenure, the company grew to one of the largest fine art services company in New York. In 1989, he established Artex Fine Art Services in Washington, D.C., with his partner, Todd Herman. After building the business into the predominant fine art service company in Washington, D.C., Artex expanded in 1996 by acquiring Atlantic Van Lines, a local competitor. This led to the opening of offices in Baltimore, New York, Fort Lauderdale, and Boston. Under Mr. Jacobs’s direction, Artex has been awarded the largest and most complex museum projects of the last decade. Artex now manages over 500,000 square feet of specialized warehousing, and its services have grown to include transportation, storage, crating and packing, installation, rigging, and conservation.

Barbara A. Ramsay earned a BSc from the University of Toronto and a master of art conservation degree from Queen’s University, Kingston, Canada. She has practiced as a painting conservator and conservation manager for the past thirty-five years in Canada, the United States, and Europe. Ms. Ramsay is an accredited member of the Canadian Association of Professional Conservators (CAPC) and an elected fellow of the International Institute for Conservation of Historic and Artistic Works (IIC). She was a painting conservator at the National Gallery of Canada (NGC) in Ottawa for eighteen years, five of those as senior conservator of fine art. She has taught painting conservation as an associate professor in the Queen’s Master of Art Conservation Program. Ms. Ramsay is past president of both the IIC−Canadian Group and CAPC. After several years of running her own private conservation practice in Ottawa, she worked with John Jacobs at Artex Fine Art Services, Washington, D.C. to establish the Artex Conservation Laboratory in 1999. As director of conservation services, she manages the laboratory and directs the work of three professional painting conservators on staff, plus a variety of subcontracted conservators in other specialties for specific projects. She serves as project manager for complex conservation projects for museums, private and corporate collections, government agencies, artist estate collections, and others. Ms. Ramsay lives in Bethesda, Md., and has two sons attending university in Canada.

Dr. Roman Kräussl is associate professor of finance at VU University Amsterdam. He studied economics at the University of Bielefeld and got his PhD in Financial Economics at the Center for Financial Studies (CFS) at Goethe-University Frankfurt am Main. Apart from his position at VU University, Dr. Kräussl currently also holds a position as research fellow at CFS and at the Emory Center for Alternative Investments within Goizueta Business School, Emory University. His current research interests include alternative investments, private equity and venture capital financing, and art and finance. He established the Web site www.art-finance.com, where he publishes some of his recent work on art as an alternative asset class, mostly on building liquid art investment indices in order to evaluate optimal portfolio allocation decisions into art.

Ralph E. Lerner is the preeminent attorney practicing full time in the field of art law. He is counsel at Withers Bergman LLP and the co-author of the award-winning treatise, Art Law: The Guide for Collectors, Investors, Dealers and Artists, acclaimed as the “industry bible” by Forbes Magazine. He has served as chairman of the Art Law Committee of the Association of the Bar of the City of New York, chairman of the Fine Arts Committee of the New York State Bar Association, and chairman of the Visual Arts Division of the American Bar Association Forum on Entertainment and Sports Law. He is currently on the board of the New York Volunteer Lawyers for the Arts and is a fellow of the American College of Trusts and Estates Counsel. Mr. Lerner is a nationally acclaimed speaker and writer on the topic of tax planning for collectors and artists. He has extensive experience in dealing with the Internal Revenue Service in the broadest possible manner and numbers among his clients many of the foremost artists, collectors, and art dealers in America.

Rena Neville began her career as a litigation associate in New York City with the law firm of Sullivan & Cromwell. She then joined Sotheby’s where she was worked since 1989. During her first eleven years with the company, she acted in a variety of legal capacities between London and New York, including general counsel for Sotheby’s Europe, deputy general counsel worldwide for Sotheby’s Holdings, Inc. and worldwide director of compliance, business practices counsel and senior vice president, Sotheby’s Holdings, Inc. In 2006, she returned to New York City and assumed a nonlegal role as head of client development for Sotheby’s North and South America.

Ms. Neville has served on various committees relating to art or art law or lobbying, including the Executive Committee of the British Art Market Federation, the European Round Table, the New York City Bar Association’s Committee on Art Law and the board of directors of the Art Loss Register. She graduated from Denison University with a BA in Philosophy and received her JD from the Washington College of Law, American University. Ms. Neville’s notable publications in the area of art and law include “The International Movement of Cultural Property” (Chapter 6 of Art Law Handbook) in 2000 and “European Experiment in Enforcing the Export Control Laws of Fellow Member States” (International Bar Association Newsletter, IBA Committee 20 on Art and Cultural Property, May 2001).

Pierre Valentin specializes in art law. For the past fifteen years, he has advised art collectors, art market professionals, artists and their estates, and museums and galleries on all legal issues arising when buying and selling art and managing art collections. He heads Withers’s Art and Cultural Assets Group, a team of specialist art lawyers in London and New York. The focus of his practice is the visual arts. He handles a mix of contentious and transactional work including fraud and dispute resolution, restitution and repatriation, private treaty sales, consignments to auction, tax solutions around art, import and export, raising capital against art, and art investment funds. His practice is multijurisdictional and covers the fine and decorative arts, from antiquities to contemporary art. Prior to joining Withers in 2003, Mr. Valentin was a senior director and associate general counsel at Sotheby’s. He is a trustee of the World Monuments Fund in Britain and of the Artists’ Collecting Society. He teaches art law at a postgraduate level at the Sotheby’s Institute, the London School of Economics, and the University of Lyon. He is fluent in French, Italian, and Spanish. Mr. Valentin co-authored Chapter 10 with his colleagues Philip Munro and Samantha Morgan.

Philip Munro trained as a solicitor at Withers LLP in London and is now a member of the Funds, Investment and Trust team where, as well as estate planning, tax and trust issues for entrepreneurs and their families, he is interested in the use of funds vehicles for private clients and derivatives in tax planning.

Samantha Morgan works with a number of international family offices, advising on all aspects of UK tax and fiduciary issues and coordinating foreign tax and other advice for the family office and family members. She advises trust companies, banks and investment houses on fiduciary and tax issues, which has included such areas as the structure and tax treatment of investments and trust structures (including EBTs) and drafting standard trust and other related documentation. She also works with individuals advising them on their personal tax issues (dealing particularly with US/ UK tax issues).

Randall Willette is the founder and managing director at Fine Art Wealth Management (www.fineartwealthmgt.com), a London-based art investment consultancy that specializes in advising wealth managers and their private clients on art as an alternative asset class and the disciplines required to analyze this complex field of investment. Prior to establishing the company in 2003, he was executive director and head of art banking for UBS Wealth Management in London and was responsible for building its Art Banking franchise in Europe and America. While there, he developed and implemented a global marketing strategy for UBS Art Banking, integrating art assets into the firm’s overall wealth-management strategy for private clients. Before joining UBS, Mr. Willette served as managing director in corporate finance and joint head of securitization with Citigroup in Europe. His credentials include over twenty years’ combined experience in investment banking, structured finance, and private wealth management with broad international experience in the United States, Europe, and Japan. He has lectured and published extensively on various aspects of art and wealth management.

1

An Introduction to Art and Finance

Dr. Clare McAndrew

The international art market is estimated to have turned over more than $60 billion in total sales of fine and decorative art and antiques in 2008, one of its highest-ever recorded totals. By sheer size alone, therefore, it is easy to see why it has sparked the interest of the mainstream investment community: the art trade is big business. It is also a truly global business, with sales of art taking place literally all around the world. Although geographically concentrated to some degree in terms of value in the two main centers of London and New York, virtually every country has an art market of some form.

For the purposes of understanding how this unique global market functions, it is important at the outset to clarify the art that will be considered. The chapters that follow consider both fine and decorative art (and, in places, antiques). These artworks were generally made for creative, decorative purposes or what some might refer to as “art for art’s sake”—the motivation for their creation and continued existence is essentially the artworks themselves (as opposed to more utilitarian “craft” works or more commercial and functional works of design). These works are collected, bought, and sold for a range of reasons, including aesthetic, historical, and financial.

Fine art includes the basic categories of paintings, sculpture, works on paper (including watercolors, drawings, and photographs), and tapestries. Decorative art covers furniture and decorations (in glass, wood, stone, metal, and ceramic), couture (costumes and jewelry), ephemera, and textiles. Definitions of antiques vary widely, but in this context the term refers mainly to items that are at least fifty to one hundred years old and are collected or desirable due to their rarity, condition, historical significance, or some other unique feature. Some of the larger dealers and art auction houses sell a variety of other “collectibles,” such as wine, coins, vintage cars, sports memorabilia, stamps, and toys. Although some of these items have many characteristics in common with works of art (and although art is itself a collectible), these goods often function on markets with different characteristics from the art market and are therefore best classified separately.