Aug 29, 2008

Business - Philip Hoffman;Fine Art Fund

How long does it take to buy a work of art that costs at least $3 million? Only 30 seconds, says trained-to-be-a-CA chief executive of the Fine Art Fund.
Philip Hoffman, chief executive of The Fine Art Fund, loves to quote what a Bloomberg article once said about him. “In September 2004, Philip Hoffman did something unusual: He bought a painting he actually likes…,” the article began, going on to paint a picture of a dry finance professional who bought and sold paintings just as he would stocks and bonds, for whom art was not about “beauty, truth and passion; it’s about making money”. Somewhat disparaging, huh? But as he chats over an espresso in the makeshift cafeteria on the first floor of hall eight at Pragati Maidan, the venue of the first Indian Art Summit, it’s evident that far from taking umbrage, it’s just the kind of image that Hoffman likes the world to have of him, and indeed works hard to project, writes Gargi Gupta.
Hoffman is something of a poster boy for art funds, and for the entire “art as an alternative asset class” discourse, doing annual trade of $120-130 million every year through the five funds he manages. Fine Art Fund I — the first of these that he announced in 2003 to invest in museum quality art — is the longest-running and most successful art fund globally, having announced last year an average annualised returns on assets sold of 44 per cent. No wonder Hoffman’s announcement of a $25 million Indian Fine Art Fund earlier this year was for many some more clenching evidence of Indian art’s having arrived on the global map.
That also explains Hoffman’s presence at the summit and the buzz of excitement that follows his tall, brown-suited figure as he goes around the stalls, jotting down notes in his little notepad. He’s made some investments, not very huge, but which artists and how much he’s not revealing. “I was reviewing some of the works we bought six months ago,” he says, sipping his coffee in a very businesslike fashion. “They’re up 50 per cent and these are only mid-auction estimates. But then it is not unusual in these markets to make 100 per cent, 200 per cent, or even 300 per cent returns. But we are not buying emerging artists at $2,000 or $1,000. It’s a very risky game at that stage.”
The India fund has managed to attract around a hundred investors, mostly “cash-rich European individuals and a few London hedge funders managers”, Hoffman reveals, even though SEBI’s regulatory guidelines on investment in art funds did discourage some Indian banks from investing in the fund.
And what does he think of the Indian artists? “I think some of the art is great. But you know my reputation is that quite often I’ll spend less than 30 seconds looking at a work of art on which we will spend $ 3 million.” The decision to buy or not to buy, Hoffman says, is made by 30 professionals — “who between them have 400 years of expertise”.
As for himself, Hoffman says, he never buys any art for himself. “I trained as a chartered accountant. I was working with KPMG [in their audit practice] when I was recommended as finance director of Christie’s. I was 27,” trotting out the story with practiced ease. “I had no interest in the arts whatsoever.” Nevertheless he stuck on, going on to become deputy managing director of the auction house’s European business and later, managing the old masters’ division. At 33, he was member of Christie’s International Managing Board, the youngest ever. “I’ve seen more Rembrandts and Canalettos than most people in the world,” Hoffman says.
So what makes the art world go round? What is it that determines whether a painting will sell for $1,000 or for $1 million? “It’s simple economics — rarity and some amount of marketing, even if it happened hundreds of years ago. Take Canaletto. He was commissioned by the Queen to paint important British monuments. The queen herself had 20 or so of them and the rich men decided that if the queen had something they wanted it as well, and so on. It’s the same today, you hang a Gupta on the wall and it’s like hanging bank-notes on the wall or putting your bank statement on the table. I’m worth millions, it says.”
Which is also why, Hoffman feels, the art market will not be affected by the vicissitudes of the global economy. “The trading in art only looks to the economy of the super-rich,” he cites the example of Russian billionaire Abramovich spending close to $100 million just this year to pick up a few Freuds and Bacons (at record-breaking prices) to furnish his new house. “The total art market is worth around $30-50 billion, of which only about $15-20 billion is investible. And of this, only 20 individuals account for $2-4 billion worth of art.”
It’s also something, Hoffman feels, that is best left to the super rich. “Our minimum investor typically puts in around a quarter of a million dollars; and our typical investor is usually one who’s put in a million to five million dollars. I don’t advise anyone with modest wealth to invest in art. Unless he’s putting in less than 5 per cent of his money into art, he shouldn’t do it.”
As for India, Hoffman marvels at the what he calls the “entrepreneurial” spirit of Indian consumers of art. “Of all the art markets in the world, this one is the most speculative. India has the most art funds in the world. If there is a market and money to be made, you guys are very fast at it, faster than the rest of the world.” It might be wonderful but it also leads to instability, Hoffman seems to imply, because there are few serious collectors and more of those who “buy now only to sell on the way home”.
The problem is also one of the lack of institutions to widen interest and cultivate tastes in art. “Unlike in New York, where curators have decided that Picasso is important or London where taste-makers have decided Rembrandt and Titian are going to be there until posterity, in India the names are constantly changing. Yes, five to seven names are constantly mentioned but there’s no unanimity,” he says draining the last of the coffee. “Look at the Middle East,” Hoffman says, “where Abu Dhabi is coming up with a cultural centre that’ll cost $30 billion. Imagine how much their curatorial direction will influence the market when that centre is up?” Indeed, more than China or India, Hoffman seems upbeat about the prospects of Middle East art, not the least because unlike the other art markets, “it is still mostly people from the Middle East who are investing in Middle Eastern art”.
But don’t lose heart — “In the long term, India is a one-way horse,” Hoffman predicts. “It has a long way to go.” We’ll hold on to that.


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