Manager Update - Q4 2018


Serge, Micky, and Omer Tiroche at Art Market Budapest 2018 insider talk "Art Dynasty"

Serge, Micky, and Omer Tiroche at Art Market Budapest 2018 Inside Art talk "Art Dynasties". 

Dear Readers,

Those of you who have been reading my newsletters regularly will remember that I have been warning of a global slowdown throughout 2018. Here is an extract from my first quarterly newsletter posted on Jan 21, 2018:

“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.” I also said the correction would be “starting off in capital markets with possibly a spillover to the art market if the correction persists.”

Fast forward 12 months and financial markets have had the worst year since the 2008 crisis. The S&P 500 is down 6.2% in 2018, masking a huge drop of 20% between the high of 2930.75 on September 20th and the low of 2351 on December 24th. European Markets are down 13%. The leading index in China, the Shanghai Composite, is down 24.6% and the MSCI Emerging Markets index (the most relevant comparable to our fund) is down 16%. 

In parallel, the Art Market seems to have held up appearances, but some astute observers have recently sounded the warning bells: “the Art Market has experienced growth in 2018… steered more by an increase in volume than by price inflation” concluded Blouin Art+Auction in their 2018 Art Market review. “Art market in 2018: a year when sales went up, records fell, but alarm bells rang” wrote the Telegraph on Dec 18. And in a December 26, 2018 article titled “Will the art market comes to its senses in 2019?” Susan Moore wrote for Apollo Magazine explained the phenomenon: “it does seem that this past year a critical line has been crossed that endangers the uneasy equilibrium of the global art market. At its headiest heights, this market has long been a world of smoke and mirrors but it has been brilliantly and professionally managed. Today it more closely resembles the Wild West. Calling the shots are the vendors and those who make a killing by providing auction houses with third-party guarantees… It is not uncommon for collectors to threaten not to bid on a lot unless they can also guarantee it... The result of third-party guarantees is that works of art come to auction with estimates that bear no relation to an artist’s established market value.”

My view is consistent with the above messages, the main contemporary market is extremely fragile and becoming more and more selective with only a very small number of artists truly seeing price appreciation. The exception is with anything African.

Thinking about the fund’s life cycle, the timing of the slowdown in the art market is quite unfortunate. In principle, I have a daunting task to sell 400+ works over the next three years (fund maturity date is February 2022). As a result of this view and the fact that we have received a large redemption request by one of our investors, the Board of Art Vantage PCC decided on December 13 to bring forward the orderly liquidation period to February 2019, instead of February 2020. Talks about a few auction placements of important works in the collection are already underway.

On the other hand, I am convinced there is enormous long-term potential for many of the emerging artists in the collection and for a few of the important works where the current market is particularly weak (e.g. Chinese & Indian Contemporary), despite very robust fundamentals – huge economies, good local art infrastructure, growing international interest, and excellent artworks. So in parallel, I am exploring options to extend the life of the fund with a subset of the works.

During 2018 the fund attempted 13 auction sales and had mixed success with 7 works selling (including a direct private sale to a Museum) for a total of $233’000. The works sold produced a Gross IRR of 20.76% which is slightly higher than our since inception Gross IRR average on realized works of 19%.

In 2019 we intend to ramp up sales efforts and take bigger risks by reducing our auction reserves. Selling privately via galleries is proving practically impossible as galleries do not respond to proposals for resale, preferring to sell new works by their artists (higher gallery commission and happier artists).

Still from the movie The Price of Everything, 2018, produced by Jennifer Blei Stockman and Debi Wisch for Hot & Sunny Productions and Carla Solomon for Anthos Media.

Presenting the #africafirstresidency to a group visiting Israel from Schirn Kunsthalle Frankfurt. Mounted a 1 day exhibition with 8 works - 1 by each of the resident artists in the program thus far:

Serge Tiroche presenting the Africa First residency to a group visiting Israel from Schirn Kunsthalle Frankfurt. Mounted is a one-day exhibition with eight works by each of the resident artists in the program thus far. 

In terms of PR, I had a brief appearance in Nathaniel Kahn’s widely publicized award-winning movie on the art world “The Price of Everything” which is now available to download on HBO (link: I attended the private screening during Frieze London prior to its release to theaters and have been receiving many comments from friends across the art world. After Frieze, I participated in a panel conversation on “Art Dynasties” during Art Market Budapest. In November I hosted a group of friends of the Schirn Kunsthalle Frankfurt for a talk and exhibition of our residency artists at Gordon Gallery in Tel-Aviv.

Please don’t hesitate to reach out if you have any thoughts or comments.

Best wishes for 2019, 

Serge Tiroche