Record prices underline art’s importance as an asset class for investment and as collateral for those who use art collections to finance business endeavors.
The contemporary art market has seen its own renaissance this year with a record $2.7 billion in worldwide auction sales of artwork between June 2020 and June 2021, according to an annual report of data released by Artprice in September.
This resurgence in interest and demand not only serves to underline the continuing health of the art market, despite the impact of the global pandemic; but also its position as one of the leading alternative forms of investment. However, valuable pieces of artwork are not just a good investment, they are also valuable assets that can be used as collateral for financing.
Launch of Griffin Art Partners
To capitalize on this emerging asset class, in 2017 the REYL Group launched Griffin Art Partners in collaboration with LINK Management, a Luxembourg-based company that specializes in art consulting.
REYL had already developed proven expertise in the field of art and its financing, and the ability to complete its range of services dedicated to art collectors further positioned it as a partner of choice.
Enabling to Finance Business Endeavors
Griffin Art Partners is a securitization platform providing high-end loans collateralized entirely by works of fine art. Its exclusive role is to lend funds to private collectors and other professionals of the sector, backed by their works of art, enabling them to finance their business endeavors.
These non-recourse loans – for which the collector is not personally liable – are then securitized: transformed into bonds and offered to investors. The bonds have an international ISIN code and can therefore be easily subscribed to by family offices, private debt funds, or private banks.
Highly Liquid Positions
«Art lending is an innovative investment solution,» says Xavier Ledru, Head of Corporate Advisory & Structuring at REYL and an expert in the field. «It allows investors to diversify their portfolios and to complete highly liquid positions.
The total return of the art market has always had a low correlation with traditional asset classes: unlike equities or bonds, securities issued by Griffin Art Partners are based on underlying assets that do not depend on the evolution of financial markets.»
Individual Works
Xavier Ledru says that the typical client tends to have collections worth at least $2 million, and individual works of art which are worth more than $100,000. Loans are then limited to a maximum of 50 percent of the lower estimated value of the works, starting at $1 million.
The works that were choosen as collaterals generally date from 1875, marking the beginning of the Impressionist movement, as this and subsequent artistic movements represent more than 80 percent of the art market in transaction value.
Some of the most preferred works include those by Monet, Matisse, Warhol and Basquiat. After structuring the loan, the borrower can store the artwork with a third-party custodian in a free port or keep it at home after taking out dedicated insurance (except in Switzerland).
Digitalization of the Art Market
Similar to the rest of the world, the impact of the pandemic also brought forward a pace of change within the traditional art market. The last two years have seen many auction houses and fairs switch their activities online, with the result that there has been an acceleration in the growth of online sales, as customers become increasingly comfortable with the internet as a channel.
According to the latest online art market report recently published by Hiscox, online transactions by Sotheby's, Christie's and Phillips generated $370 million in the first half of 2020, a figure more than five times higher than the same period in 2019.
Total Independence
Griffin Art Partners is not the only player in the art asset-backed notes market; but what sets it apart is its total independence thanks to a unique structure, from due diligence to financial structuring. This guarantees maximum discretion for the client, which is actively sought after and a highly valuable, personalized service.
