Manager Update - Q4 2017


Dear Readers,

Hope you had a terrific close to 2017 and are ready for another seemingly blockbuster year for the art market.

As we enter 2018, stock markets continue to rally and hit new record highs, cryptocurrencies are the new rage and every once in a while, taxi drivers are asking for advice on when to get in. The bullish talk and sentiment in the art market in the first weeks of 2018 is no different and it feels to me like a major correction is on the horizon, starting off in capital markets with possibly a spillover to the art market if the correction persists.  

2017 brought roaring new records in the art market from “Salvador Mundi” - a questionable Leonardo da Vinci - that sold for over $450 million, obliterating any previous artwork price; to a poppy Jean-Michel Basquiat that sold for more than $110 million, setting a new auction record for an American artist; to a Qi Baishi ink-brush “12 Landscape screen” work that sold for over $140 million, becoming the most expensive Chinese work to sell at auction. These examples highlight the dilemma faced by many professional collectors and curators who time and again get overwritten by market forces and the whims of new collectors hailing from the emerging world – respectively Abu Dhabi, Japan and China in these cases.

In retrospect to 2011, from the perspective of the investment strategy of the Tiroche DeLeon Collection, whose base assumption was that collectors from the emerging world would become the new super-collectors, we were proved 100% right. That said, our assumption that these new collectors would be drawn to contemporary artists from their own generation who document the rapidly evolving social structures and political landscapes, turned out to be less true, at least in the short run. I still believe in this from a longer term perspective. What is happening to a greater extent than expected however, is that Western audiences are growing more and more interested in art from the emerging world, pretty much drawn to it for the same reasons I am. And Africa is where momentum seems the strongest.  

The fund has taken advantage of the strong interest in the African market and has sold down almost 50% of this portfolio over the course of 2017, with a few more sales anticipated in Q1 2018. This is not a reflection of a lack of commitment to this market, but rather a necessity of the fund that entered the second stage of its life cycle, needing to raise liquidity levels through measured sales. We also sold works from our Eastern European collection that fared much less well, for the same reason.

With regards to Africa, it remains one of the markets we are most interested in. Most of the final acquisitions we made in Q4 2016 and Q1 2017 were of artists from the region, including via our last 2 artist residencies. In fact, I have continued to explore the region in depth during 2017 with trips to Cape Town, Accra, Harare and Lagos and have commenced efforts to set up a second fund called “Africa First” with a similar investment philosophy to the Art Vantage / Tiroche DeLeon Collection, only with more emphasis on the African continent and on social impact. In Q1 2018 we are dedicating our Residency program in Israel to artists from the African continent, starting with 2 young female artists from Zimbabwe.

In 2017, the fund sold 18 artworks for a total of over $1.5 million, resulting in a trading profit of $375’000 representing a 32% return and a gross IRR of 6.74%. The IRR is markedly below our since inception Gross IRR on realized works which stands at 18.78%, and is primarily due to the sale of an El Anatsui work which realized $873’000 net, generating a 7% Gross IRR. We also sold a few non-performing contemporary Russian art works at a small loss. 

We start 2018 with an innovative collaboration with Art Stage Singapore (January 25-28) which takes place in parallel to Singapore Art Week. We will showcase a selling exhibition of highlights of our South Asian Collection in a 200 sqm booth, the largest at the fair. I will also be giving a talk about the Tiroche DeLeon Collection - achievements, lessons learned and fund results. It is quite unusual for a fund to be selling at an art fair and we are hopeful this can lead to other similar oportuinities for orderly divestment at the best possible price, selling directly to end collectors. If the trial is successful, we will look to replicate in other parts of the world. We also continue to look for selling opportunities via private placement and auctions.

We are in progress of obtaining the year end valuation of the collection by a leading international auction house. In a few weeks we will be sending out full details and an analysis of the 2017 financial results. In the mean time, I thank you for your readership and stay at your disposal for any thoughts or suggestions.

Wishing you a healthy, insightful, creative and joyful 2018.

Best wishes,
Serge Tiroche, co-founder