Brazilians discover art investment

Brazilians are getting more sophisticated in asset allocation. Different alternative investments raise as a novelty and art investment may be the intangible of intangibles .. but why not add it to the list? I love art and the idea of combining it with investment sounds good to me but I am learning about it and I’d like to share this piece I read in Bloomberg.

May 16 (Bloomberg) — A Brazilian investment fund worth $24 million has attracted wealthy investors as the value of auctions of the country’s art grows by as much as 38 percent a year.

The fund is the latest from the emerging BRIC markets of Brazil, Russia, India and China to appeal to collectors. Brazil Golden Art: BGA Private Equity Investment Fund is part of the Rio de Janeiro- and Sao Paulo-based firm Plural Capital, which is putting money into Latin America’s largest economy.

“While most of the modern and contemporary art markets around the world were hit hard by the 2008-2009 economic crisis, the Brazilian auction market recorded a 38 percent increase from 2008 to 2009,” the London-based research company ArtTactic said in its latest report about the country.

About 40 art funds were launched in the U.S. and Europe during the boom of 2005 to 2007, according to Skate’s Art Market Research. Since the financial crisis, the London-based Fine Art Fund, started in 2004, is the only one of these vehicles that has remained conspicuously active in the West. It currently has about $100 million under management after originally planning to raise as much as $350 million.

“There’s a deep group of Brazilian collectors and there’s been less speculation in that particular market,” Philip Hoffman, chief executive of the Fine Art Fund, said in an interview. “We do have investors interested in Brazil.”

The BGA fund is worth 40 million reais and will buy contemporary works, mainly from Brazil. Initial external investment for the new fund was 10 million reais short of the target capitalization, Bruno Miguel, an analyst at Plural Capital, said in an interview.

Investing Options

“The fund will spend three years investing, then two years uninvesting,” Miguel said. “We may sell the whole collection to a museum or gallery. We’ll see what the best option is at the time.”

Phillips de Pury & Co. found buyers for eight out of the 10 Brazilian works offered in the evening session of its last two- day BRIC auction in London last month.

The 1989 Beatriz Milhazes wallpaper-like abstract, “I just wanted to understand why he did that,” led the Latin American contingent at 361,000 pounds ($585,000). The presale estimate was 250,000 pounds to 350,000 pounds.

Investors hope for the sort of price rises seen for the constructivist sculptress Lygia Clark in the last 12 months. In April 2010, at Phillips’s inaugural BRIC sale, a 1960 aluminum “Bicho” sculpture by Clark sold for a record 367,250 pounds, more than five times the previous auction high for the artist.

Paris Fair

Two further 1960s “Bicho” pieces sold for about 700,000 euros ($987,000) each at the FIAC art fair in Paris in October.

Neither BGA nor Phillips, when contacted, would comment on whether the fund had been bidding at the last London BRIC sale.

A 1970 white painted wood “Relief” by the constructivist sculptor Sergio Camargo was another Brazilian success, selling for 229,250 pounds against a high estimate of 120,000 pounds.

In February, Christie’s International achieved an artist record 1.1 million pounds for the 2001 work, “Parede com Incisoes a la Fontana II (Wall with Incisions a la Fontana II),” by the Brazilian contemporary artist Adriana Varejao (born 1964). Reminiscent of a Lucio Fontana slash painting, with bleeding incisions, it had been estimated at 200,000 pounds to 300,000 pounds and was the first work by a Brazilian contemporary artist to fetch a hammer price above 1 million pounds at auction, ArtTactic said.

“Despite the overall strong performance in the Brazilian contemporary art market, the sector remains narrow, with only four or five artists driving the market and the prices,” ArtTactic said. “We believe the recent auction performance by Varejao and Milhazes will increase confidence among consignors and buyers, and we are likely to see a broader range of Brazilian artists coming to the auction market.”

The 7th edition of Brazil’s biggest contemporary art fair, SP-Arte, ended yesterday in an Oscar Niemeyer-designed building in Sao Paulo. The event featured a record 89 dealers, more than 70 of them based in Brazil.

–Editors: Mark Beech, Jim Ruane.

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Published by Hildete Vodopives

Hildete de Moraes Vodopives is founder of Brazil Global and of the Harvard Strategists Group. She has a PhD in Economic History and advises companies and investment agencies in international business development.She served as Corporate Relations Director and later, on the board of the Brazilian Investment Analysts Association (APIMEC).

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