By Chan Quan Min
The Southeast Asia Art Capital fund, appears at first blush, to be structured just like any other financial investment product. But the private equity fund, only recently launched to the public, will not deal in the typical asset classes of bonds and shares. Instead, the fund is banking on the appreciation in the prices of contemporary Southeast Asian art with an aim to double investor funds in six years. Here, KiniBiz speaks to fund managers Valentine Willie and Asgari Stephens.
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Closely watched in art circles for his next unexpected move, Valentine Willie, a gallery owner-operator, art dealer and advisor for over 15 years, has teamed up with seasoned fund manager Asgari Stephens to set up a RM30 million contemporary Southeast Asian art investment fund.
Asgari Stephens
The Southeast Asian Art Capital fund, Malaysia’s first of its size and scale, was launched just last year. In the several months since, the fund managers have raised approximately RM4.5 million in committed funds from five investors, said Stephens.
Stephens told KiniBiz in an interview on Monday that the art fund is close to its first close, which is set at an initial fund size of RM10 million.
Between themselves, the fund managers have committed RM900,000 of their own money to the fund, or 3% of the total fund size, such is the managers’ confidence in the appreciation of prices for Southeast Asian art.
In managing the fledgling art investment fund, Willie and Stephens are joined by Angie Ang, the managing principal of corporate advisory firm Affilion and Yeoh Liew Se, a certified accountant.
In many ways, the fund is structured as a private equity fund, where investors pool money to collectively purchase assets with a view to gain from an appreciation in prices. The key difference between Southeast Asian Art Capital and that of most other investment funds is that the assets held by the fund are not the usual shares and bonds but instead, artworks.
Specifically, the fund is restricted to paintings and to a lesser extent sculptures by Southeast Asian artists. Other investment restrictions governing the fund’s future purchases include placing not more than 10% of committed capital into the work of any one artist, a maximum of US$150,000 (RM500 million) can be spent per piece of artwork and a pledge not to reinvest any amount realised from a divestment.
Stephens, a prominent fund manager in both private and public equity investing will be in charge of the corporate governance aspect of the fund.
Valentine Willie
Meanwhile, the face of the fund is none other than Willie, who the fund will rely on for his “strong network of art buyers, private collectors and regional auction houses.”
The prospectus document for the art investment fund praised Willie for being at the “forefront of building an eco-system for the Southeast Asian art world.”
“He has been involved in various aspects of the value chain, from nurturing young artists and hosting showcases, to the management of galleries. As founder of Valentine Willie Fine Arts group, his galleries in Indonesia, the Philippines, Singapore and Malaysia have averaged 60 shows per year since 2008,” according to Willie’s profile in the prospectus.
Speaking to KiniBiz in an exclusive interview at his home-office, Willie shared some of his well thought-out strategies on art investing.
“The history of Southeast Asian art is still being written,” said Willie. Predicting strong growth in the institutional art market in this decade, Willie was confident that the art fund has been set up in the right place and time to capitalise on institutional buying.
Willie’s investment strategy will be discussed further in tomorrow’s third and final part of this series.
Doubling the investment in six years
The fine print of the fund reads like that of any other private equity fund. Management fees have been set at 2% per annum of total fund size while the managers’ profit share is listed at 20% of profit or returned funds after fund and management expenses.
This combination of a fixed annual management fee and performance based compensation, commonly termed ‘two and twenty’ is typical of most private equity funds, even hedge funds.
Like successful hedge funds in a good year, the Southeast Asian Art Capital fund intends to earn its investors double-digit annual returns.
“Our target is for the fund to double investors’ money after six years,” Stephens said. To hit its target the fund must achieve an annual return on investment (ROI) rate of between 15% – 20%.
The fund’s lifespan has been set at six years with an option to extend it for a further two years. At the end of the term of the investment, the fund’s assets will be fully divested and returned to investors.
With growth in the regional art market predicated upon a rising middle class and a sound investment strategy, the fund managers are confident the goal can be reached.
Some early purchases
While the fund is still in the early marketing stages and has not gone to first close yet, the fund managers have already begun purchasing selected works for the fund.
Kok Yew Puah’s Berhenti
The first pieces that have been added to the collection come from the late Kok Yew Puah, a pioneering Malaysian artist whose work captured scenes from urban Malaysian life in the 80s and 90s.
If sold on in the next few years, the collection of 33 painting by Kok could triple the initial investment of RM500,000, Stephens said.
The early investment in paintings by the artist is in keeping with the art fund’s stated investment strategy of identifying intrinsic value, which involves “investing in works by artists perceived to be selling at deep discounts to their actual or potential value.”
The aim will be to target overlooked artists and well-known artists that have stopped or will soon stop producing works, Willie said.
While the bulk of the early purchases have been in Malaysian art, the proportion of funds dedicated to purchasing Malaysian art is not more than a quarter.
Close to half or about 40% of the war chest will go to buying Indonesian art.
The remaining third of the fund will go to investing in art from other neighbouring countries, in particular the Philippines and Thailand.
Yesterday: Art as an investment?
Tomorrow: Investment strategy Q&A with Valentine Willie
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