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Stored Away: There's So Much Art Available For Market

Tom Burroughes

19 August 2020

(This is part of a series of features and interviews about the intersection of fine art and wealth management.)

As many as a third of art collectors keep their works in storage and out of view, suggesting that a sizeable chunk of the $1.74 trillion privately held art could be lent against and used to drive liquidity in the market, a European specialist firm argues.

London-based , report on 2019, issued here) is not to be sneezed at. (There is a need to tread carefully, as this article explains.)

Van den Oever has plenty of experience in finance and art. He served for 12 years at Christie’s as Continental European head and global managing director of the Impressionist and Modern Art Department prior to founding Overstone. With 12 years in debt capital markets under his belt at Paribas, Bankers Trust, and Credit Suisse First Boston, Van den Oever also founded, the UK's first online mortgage brokerage business, acquired in 2001 by Netwindfall. Van den Oever has an MBA from the University of Hartford and is an INSEAD alumnus.

Van den Oever said that his firm often works with family offices, and one reason for starting Overstone was a sense that the market potential was not being fulfilled: “There were not many offers in terms of , UBS, etc); such lending comes typically at around LIBOR+ 1.5-3.5 per cent, Van den Oever said. “That market is growing massively.” 

There are specialised asset-backed lenders, such as Athena and the . The capital provided comes from a private equity-style model where the aim is to make returns more in the region of LIBOR+10 per cent or thereabouts. The reason why this margin is bigger for banks than these specialists is that they are set up specifically for the purpose of this market, while banks are offering the lending levels as part of an add-on to other services and often as a way to tie in a client and win their wider business. 

The auction houses such as Sotheby’s and Christie’s are a third type of player who will offer lending services to clients; this is asset-backed and tends to be relatively expensive. Family offices and private equity shops tend to be relatively opportunistic in this space.

The art market has been fairly opaque in the past and not widely or deeply regulated, although change has come with the EU’s Fifth Anti-Money Laundering directive, among other changes, Van den Oever said. 

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Banks are moving out of investment banking and looking for new ways to add value; data services and transparency are improving. Organisations such as Artnet provide more data on transactions and pricing so that the situation is less opaque than before. However, there is still some way to go before reaching a fully accepted, international yardstick of the art market. 

One statistic stood out when Van den Oever mentioned how much art often does not see the light of day – not even appearing on an owner’s wall. Citing figures from UBS this year, he noted that just over 30 per cent of collections are in storage, and out of sight. Van den Oever and colleagues reckon the share might be even larger than that.

Art investment and advice on it is a complex field, and not everyone has been able to make the business catch fire as much as hoped, but what is clear is that this market has more room at the top, particularly as and when the global economy bounces back.