Indian Auction House Plans Art Fund as Paintings Surge in Value
Neville Tuli is looking for $33.5 million to invest in what may be India’s hottest market: Art.
Soaring prices for contemporary Indian works prompted the chairman of Mumbai-based Osian’s Connoisseurs of Art Ltd. to start the nation’s second art investment fund. Osian, with sale rooms in New Delhi and Mumbai, will start raising money on June 5, Tuli said in an interview.
Days after the Mumbai stock exchange had its biggest weekly drop since 2001, a painting by Indian-born Francis Newton Souza sold at auction for a record $1.2 million. Prices of works by Indian artists such as Souza, Vasudeo S. Gaitonde, Tyeb Mehta and Maqbool Fida Husain are being driven up by a global surge in art investment, coupled with growth in Asia’s fourth-biggest economy that has swollen the ranks of the nation’s wealthy.
“The affluent are coming in,'’ said Pradipta K. Mohapatra, Chennai-based collector and chief executive for technology at RPG Enterprises, an Indian group with interests from software to supermarkets. “Young executives at banks and in information technology are the new breed, buying art for the love of it.'’
Mohapatra, who has been buying art for three decades, said an oil painting by Yusuf Arakkal that he bought eight years ago for 45,000 rupees is now worth about 1 million rupees. His most recent purchase is a color pencil sketch of a nude woman by K.C.S. Pannikar for 65,000 rupees.
An investor in Osian’s fund will need to put in at least 1 million rupees ($22,300) for a minimum of three years, said Tuli.
Souza Auction
At the Sotheby’s Holdings Inc. auction last week in London, Souza’s “Amsterdam Landscape'’ sold for almost eight times its top estimate. The sale raised 4.2 million pounds ($7.8 million), beating its target by more than a third. Souza died in 2002 in Mumbai after living mostly in the U.K. and the U.S.
Tuli bought at least four works at the auction, which he said were for his private collection.
Christie’s sold $15.6 million of modern and contemporary Indian art in New York on March 30, setting records for paintings by Husain and Gaitonde. Five years ago, its India painting sales totaled about $650,000.
The combined wealth of India’s 40 richest people jumped 74 percent to $106 billion, according to Forbes Asia’s annual list announced in December. Twenty-seven members on the list are billionaires, more than double the previous year’s count.
Prime Minister Manmohan Singh is trying to boost growth in the $775 billion economy to 10 percent a year in the next decade, from an average 8 percent the past three years.
“The contemporary Indian market is one of the fastest growing,'’ said Edward Gibbs, a Sotheby’s specialist, in an interview in London. “It’s driven by the growth of the Indian economy and a raised awareness of Indian artists.'’
`Sky’s The Limit’
“The sky seems to be the limit for this collecting category,'’ Yamini Mehta, specialist head of modern and contemporary India art at Christie’s, said in a statement after the March 30 sale.
Since 2004, a dozen or so funds globally have tried to lure investors as the price of art has soared. Amongst the earliest was the London-based Fine Art Fund, set up in 2000 and managed by Philip Hoffman. The fund requires a minimum investment of $250,000.
Others include China Fund, run by Julian Thompson, a former chairman of Sotheby’s International and a specialist in Chinese porcelain, which focuses on Chinese art, and New York’s Fernwood Art Investments, founded by Bruce Taub, formerly senior director of the international private client group at Merrill Lynch & Co.
In September, the Mumbai-based Yatra Art Fund was set up with 107.5 million rupees. Yatra, which has a lock-in period of five years, attracted about 40 investors, said Geetha Mehra, chief operating officer of fund.
Original Work
“The general creation of wealth among Indians has fueled the market,'’ said Mehra, who also runs the Sakshi Gallery in Mumbai, and wouldn’t reveal details about the fund or its performance. “The artists are very good. There is strong original work being done here.'’
Osian’s was set up by Tuli in 2000 as an art auction house, with the first sale being held in February 2001, where the average lot price was 140,000 rupees and raised a total of 18.04 million rupees, Tuli said. At its most recent auction in March, Osian’s had an average lot price of 4.8 million rupees and raised a total of 417.3 million rupees, he said.
The art fund being set up by Osian’s is structured as a private trust called Oseta Investments Trustee Co. The fund will be managed by Osian’s Connoisseurs, which will charge an annual management fee equal to 3 percent of assets, a maximum 5 percent for expenses and take a 30 percent cut of profits once the fund clears a minimum hurdle of a 15 percent annual return.
Tuli expects the fund to give investors an annual return of about 35 percent.
Still, art lovers such as Mohapatra would rather buy works they love rather than own units in a fund.
“I will never invest a penny in an art fund,'’ Mohapatra said. “I welcome the funds, because they will give depth to the market and there are hundreds of artists who can do with these organized funds buying from them directly.'’ www.bloomberg.com
