Art & Finance Newsletter #18 - Happy Holidays!
Happy holidays to you and your family! I hope everybody is having a relaxing week and enjoying sometime away from work and the office.
Since it's holidays today I'm going to keep the intro & outro short so I can get back to my eggnog.
On to the art market...
Unusual Acquisition: Brickmaker Moves into Art Investment
Many would argue that the construction business is more lucrative than investing in art. But in a bizarre example of the boom in fractional ownership of works of art, the new US owner of a Chinese building materials company has eschewed brickmaking in favour of art. It has bought a $75m Michelangelo painting by issuing shares and, earlier this month, suspended trading on the Nasdaq stock exchange until it has changed its name to Millennium Fine Art.
The unusual move comes under the company’s new executive chairman Daniel McKinney, who did not answer the question of why he has bought a Chinese construction business in order to start a US-based art investment business. The entrepreneur acquired a 91.2% stake in Yulong Eco-Materials (Yeco) after it completed the purchase of the so-called Millennium Sapphire for $50m on 17 October, which led to its share price soaring by over 600%. After selling Yeco’s construction business and all Chinese concerns, on 30 October McKinney moved the company to New York to concentrate on investing in works of art
He will also “invite scholars and experts to examine and view the masterpieces, then tour them in worldwide exhibitions and documentaries” to generate a further revenue stream in the form of royalties and ticket sales. “We will also retain some of the world’s top art and promotions experts to develop and manage this once in a lifetime opportunity,” he says.
The Art Newspaper - Brickmaker Moves into Art Investment
Investors Are Backing Artist-Run Businesses
Nearly two decades ago, when Laura Callanan was the deputy chief investment officer of the Rockefeller Foundation, she saw an interesting, if unconventional, investment opportunity: a loan to a recording company, Smithsonian Folkways Records, part of the Smithsonian Institution’s effort to preserve the world of sound. She loaned the record label a significant sum on behalf of the foundation.
Callanan recently found herself sharing this history with the Smithsonian’s chief operating officer, as they discussed how the institution could channel some of its $1.7 billion in investable assets towards creative businesses through what Callanan calls “creativity lens investing.” Creativity lens investing is an emerging subset of the broader field of social impact investing, in which investors look not just at financial returns when evaluating a potential investment, but also at the societal benefit it could generate, as well. Building on the decades-old concept of “gender-lens investing,” which evaluates investments based on their impact on women and girls, Callanan asks: What if investors targeted artists and creative entrepreneurs who are building socially oriented businesses?
Evan Beard, who oversees Bank of America’s U.S. Trust Art Services division (and is a regular Artsy contributor), said impact investing has been slower to take hold in the arts space, since collectors and arts patrons prefer to gift or invest without an intermediary, such as an impact fund, and traditional arts philanthropy already works well. But he said the gallery space is ripe for disruption through impact investing.
Artsy - Investors Art Backing Artist-Run Businesses
Collaboration & Preventing Art Crime
As the art market grapples with the possibility of new regulatory law enforcement to institute anti-money laundering (AML) programmes, the challenge art dealers and auction houses face is instituting compliance while managing cost and operational burden. As a result, the commercial art industry may want to consider creating a collaborative consortium that securely pools data, technology and even human resources to implement and manage AML compliance programmes so that art specialists can train their efforts on art rather than policing financial crime.
Similar endeavours in other industries suggest that there is merit in working together to reduce financial crime. Recently, the Virginia-based Financial Crimes Enforcement Network (FinCEN) published an interagency statement in favour of certain low-risk financial institutions sharing Bank Secrecy Act and AML resources. An even more comparable example can be found in the jewellery market where the Jewelers Vigilance Committee provides guidance to jewellery dealers in AML risk assessment and establishment of compliance programmes.
Based on risk assessment results, AML art market consortium experts could then help members implement internal financial and operational safeguards that are appropriate to the enterprises’ size and complexity. These controls could be as sophisticated as continuous transaction monitoring or as simple as training staff to recognise and report suspicious activities. Finally, the consortium also could conduct testing and validation of AML programmes to assess compliance with regulatory requirements and guidance and identify deficiencies or opportunities for enhancements.
The Art Newspaper - Collaboration & Preventing Art Crime
Thank you for the support this year!
Real quick here, thank you for the support on the newsletter this year. Every time I send out an edition I receive notes from people and I very much appreciate that.
Sometimes the readers ask questions stimulated from the content, other times readers correct the grammatical errors frequently found in my writing and occasionally people ask for time to speak on client matters where I may be able to assist. Whichever the case it's always a pleasure to here from you.
I hope everybody had an excellent 2018 and is gearing up for an even better 2019!
Happy Holidays,
Blake