Osian Art Fund made an exit with a mere 5% return per annum for the thirty-six month close-ended scheme. This surely has disappointed investors, but definitely not Osian. It plans another art fund, this time for a time period of five years.
“The next art fund will be launched once there are clear guidelines from the Securities and Exchange Board of India on various key operational matters. It is now important that the system matures to a new level of financial due diligence and transparency but at the same time recognises the unique structure and logic of the art asset,” Neville Tuli, chief advisor, Osian’s Art Fund, told Moneylife.
When questioned about what would be the attraction for investors in the second fund, given the poor performance in the first one, Mr Tuli expects to bank on the goodwill the first fund has garnered. “The transparency and public accountability which the Osian Art Fund has shown has brought immense goodwill. That the investor had higher expectations in 2006, is obvious, as did we, but the whole world has had to recalibrate expectations, post October 2008.”
He also expects the fund period to last for five years the next time which will help the investor earn better returns. “A longer lock-in period such as five years would be desirable for an art fund, though early partial exit options should be built in at intervals,” he added. Officials from Osian Art Fund blame the sudden fall in art markets all over the world for the poor exit of the first art fund.
“The 5% per annum return must be seen in the context of the significant falls in the art markets across the world and in India. The significant declines in price, liquidity and confidence regarding the Indian art market would have impacted any investment. If say, Rs100 was invested in Indian art in July 2006 the return would be between Rs65 to Rs70 today. However, because of our sourcing/trading expertise and investment policy of focusing only on the top quality works of the modern masters, and less than 5% exposure to contemporary artists the Osian Art Fund could withstand the onslaught better than others,” added Mr Tuli. Even among the contemporary artists, the Fund had only the very best early works of artists such as Rekha Rodwittiya, Sudhir Patwardhan, Surendran Nair, Nataraj Sharma and Ravinder Reddy, claims Mr Tuli.
At a broader level, Mr Tuli adds that the present art market lacks the various support systems which any mature financial market should have such as liquid exchange options, underwriting facilities and relatively perfect and open flows of information. Despite the poor record of the first art fund, Mr Tuli believes that it has a legitimate position in portfolios. “It is clear that the future is very bright for this class of asset, especially once clear regulatory guidelines are in place. In my view India is ideally placed to become a leader in art funds and related platforms on a global level, once the domestic-international markets are more integrated,” said Mr Tuli.