Carola Wiese is not your typical investment banker.
The soft-spoken 31-year-old German has been going back to school to pursue a PhD, but not in finance or economics – it’s in art history. Her job at Swiss investment bank UBS AG entails travelling the world, visiting galleries and auction houses, assessing art collections, rubbing shoulders with major collectors and artists and swinging deals to buy and sell works that sometimes run into the millions of dollars.
“It’s certainly an exciting lifestyle; it’s not a 9-to-5 job,” Ms. Wiese said. “But it’s not only about flying around the world and attending posh events. We’re also doing a lot of back-office work.”
Ms. Wiese is part of UBS’s art banking operation – a 14-person group of specialists that provides some of the bank’s wealthiest clients with advice on investing in fine art.
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The bank last week brought her to Canada to meet about 50 of its richest clients, as part of its new efforts to tap the fast-growing Canadian interest in art collecting – an offshoot of the country’s unprecedented wealth boom of the past few years.
The country now boasts more than 250,000 millionaires – up about 40 per cent in the past five years – as soaring natural-resource prices and years of healthy economic growth have given birth to a fresh set of newly rich Canadians. Within that group are roughly 3,000 people with more than $50-million – a class of the super rich known as ultrahigh-net-worth, a highly coveted market segment that has high-end wealth-management providers taking a closer look at Canada.
Art banking is just one of a growing number of non-traditional wealth-management services for the ultrarich covering what the annual Capgemini/Merrill Lynch World Wealth Report refers to as “investments of passion.” These services can range from coin and jewellery collecting to buying private jets, getting into the wine business or investing in race horses.
There are advisers to help you make philanthropic donations, others to manage your various households while you flit about the globe. Some private banks even offer what are called “concierge services” – someone at your bank will book your vacations, plan your parties and procure your theatre tickets.
Experts say these services are still in their infancy for Canadian clients, but with the potential client base swelling annually, they look certain to become more popular.
Art banking tops the list of those services, as art is the leading investment-of-passion among the world’s ultrahigh-net-worth individuals. The value of sales at the world’s auction houses has tripled in the past five years – a trend reflected in the Canadian art market.
“A lot of people across the country have done very, very well,” said Robert Heffel, co-owner of Vancouver-based auction house Heffel Gallery Ltd., whose auction business has almost tripled in the past three years. “Art has become another place to park your money.”
Observers say the boom in Canada’s resource sector has particularly fuelled art interest in the key resource hubs of Calgary and Vancouver, as many of the nouveau riche are discovering the art world.
“In the past two or three years, because of the huge amount of money that has been created in the resource sector, there have been a lot more collectors – a lot of people who never collected before,” said Franco-Nevada Corp. chairman Pierre Lassonde, a long-time art collector who made his millions in the Canadian mining industry.
“They have all the other toys; now they’re looking for something special.”
Though art banking is hardly new – Citigroup introduced it almost 30 years ago – the providers of these services have focused on European and U.S. clients while largely ignoring Canada. But facing growing demand from their Canadian clients, that is changing.
Art-banking services could prove particularly attractive to Canada’s burgeoning wealthy art greenhorns, because they offer an independent source of one-stop shopping for their art-collecting needs. Art bankers can help clients build and manage their art collections, appraise their holdings or potential acquisitions, advise them on purchases or sales, serve as their confidential agent in negotiating deals or bidding at auctions.
But for the banks themselves, a key driver of the art-banking business is in lending services – using artwork as collateral for loans, thus allowing clients to unlock the value of some otherwise pretty static assets. At Citigroup’s art advisory group in New York, demand in the art-backed lending business has been growing by 20 per cent a year.
“That’s really been an underdeveloped market in Canada,” said one high-end art collector involved in the Calgary oil and gas scene. “If you look at active collectors in Canada, it has mostly been a cash market.”
Art tends to outperform in times when traditional asset classes are falling, and it retains its value relative to inflation.
“Art is a very useful asset to hold for the purposes of diversification,” said Jessica Knopp-Gwynne of Fine Art Wealth Management, a London-based investment advisory firm.
In fact, those attributes have spawned growth in the past couple of years in a new way to invest in art – the art fund. Functioning much like mutual funds, these funds use art as their underlying assets.
But despite the increasing prevalence of the cold-hearted profit motive, art-bankers like to remind their clients that art isn’t about the bottom line.
“Whether [the value] increases or decreases,” Ms. Wiese said, “the visual impact will always remain.”
The value of art
$1-trillion
Estimated annual value of global art transactions.
$23-million
Value of art sold at auction by Heffel Fine Art Auction House, Canada’s leading auctioneer of high-end art, at its May auction last year in Vancouver. The record-shattering auction was almost double the previous Canadian record. The auction included the sale of a piece by Group of Seven artist Lawren Harris for $2.875-million.
$94-million
The total value of sales at Canadian art auction houses in 2007.
30 per cent
The approximate value of art transactions that are conducted through auction houses.
$110-million
Assets under management in the Fine Art Fund, the world’s biggest and most successful art investment fund.
Sculpture is 
Sunset come suddenly…
