Pictet to Tap Into Art Market

Swiss private bank Pictet has discovered art as a new opportunity to earn money. It will offer its clients loans collateralized by high-value works of art as security.

Art is an alternative investment for wealthy clients, increasing the diversification of their portfolios. So far, the volume of the art market – an estimated $3 billion – wasn't matched by an offer of corresponding financial products.

Pictet is about to change this. The private bank from Geneva has joined up with U.S. private equity specialist Carlyle Group to start Athena Art Finance. The two companies injected $280 million in capital, they said in a statement.

Important Alternative Investment

The private bank will offer loans to clients, who already own pieces of art or want to invest in art, collateralized by works of fine art.

«We believe alternative investments are increasingly important for large wealth owners,» said Rémy Best in the statement. The head of wealth management at Pictet added: «Art has always been a diversification asset for our clients, in some cases because of their passion for art in many forms, or in others because it serves as a true investment vehicle.»

Niche Product

Athena Art is injecting liquidity into the art trade, lowering capital costs of these investment vehicles while increasing their value, Pictet and Carlyle expect.

Loans for art is a niche product in wealth management, hitherto the domain of Sotheby's, the auctioneer. Pictet and Carlyle aim to change this. They are convinced that clients and owners of fine art will pounce on the opportunity to make money with their collections. The target is a higher return compared with the bond market.

50 Percent of Value

Athena will offer loans of as much as 50 percent of the estimated price of the piece of art. The minimum value is set at $2 million.

About 80 artist fit the bill, including Francis Bacon, Claude Monet, Pablo Picasso or Gerhard Richter. Added to these heavyweights of the art market will be artist whose works reached the highest values according to the Tefaf Art Market Report 2014.

Pictet and Carlyle seem to have hit a nerve: Before even starting the business properly, Atheny has already posted requests for loans of 150 million Swiss francs.

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