Sotheby's is teaming up with a former hedge fund manager to beef up its finance arm. The auction house wants to be the first port of call for the ultra-wealthy looking for funds against their art collections.
Alexander Klabin (pictured below) is buying a stake in the privately-owned auction house in a strategic tie-up for financial services involving fine art, Sotheby's said in a statement. Financial details of the arrangement weren't disclosed, nor the size of Klabin's stake.
The 43-year-old hedge fund founder will become executive chairman at Sothebys' financial services arm. He is to oversee a modernization of its underwriting processes, improve its access to capital markets, and develop innovative financing solutions. Klabin, who split from his hedge fund partner earlier this year, made an unsuccessful play to buy the 276-year-old auction house last year.
Cozy Finance, Art World
The partnership underscores the extremely cozy ties between high finance and fine art: Sothebys' finance arm has written about $6 billion in loans backed by works of art and maintains a credit book of about $800 million, according to «Bloomberg». It is a highly lucrative business for the firm, according to trade outlet «Artnet».
Clients can pony up their art as collateral, meaning Sotheby's has a relatively reliable source of new consignments to auction off as well. Loan applicants are vetted less stringently than at wealth managers – because the auction house knows the value of the artwork and what it would fetch if put up for sale.
Easier Lending Process
Clients don't mind paying a higher rate of interest on auction house loans than those to banks because the process if easier and less invasive, according to «Artnet». «Its proprietary data, specialized knowledge, and global relationships put it in an advantaged position to offer its clients a broad range of flexible financing solutions and services tailored to their bespoke needs,» Klabin said in a statement.
While the pandemic has hit the art scene – wiping out big fairs like Art Basel – Sotheby's last month said revenue through July spiked to $2.5 billion on innovations like live-streaming auctions. Patrick Drahi, an enigmatic French-Israeli billionaire who lives in Switzerland, bought the auction house last year.
