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No beating about the bush.
Neville Tuli, chief advisor of the Osian Art Fund, believes that the Fund would have performed better given a longer lock-in period and better market conditions. The fund disappointed investors with poor returns in July 2009
Investors admit that the Osian Art Fund was a genuine case of disappointment in comparison to the opportunity cost in other type of investments available. However, Neville Tuli, chief advisor of the Fund, believes that the Fund would have performed better given a longer lock-in period and better market conditions.
The Fund was a close-ended fund for a period of three years. The fund successfully closed in 2006 with a corpus of Rs102.40 crore. However, three years later in July 2009, the fund made a poor exit with very low returns.
Moneylife had earlier reported that the Fund’s investors were facing delays in the redemption of the investment made. A main reason being cited for this delay was the problem being faced in selling the Fund’s art inventories. Mr Tuli said that the historical significance of both the artwork and the artist is critical in evaluation of a painting for sale. He emphasised on holding power being critical is trading artworks. However, he also said that not every artwork that is ‘old’ would turn ‘gold’ in the trade.
The Fund was also a clear example of how the Securities and Exchange Board of India (SEBI) had failed to regulate art funds under the Collective Investment Schemes (CIS). SEBI had earlier sent a show-cause notice to Osian regarding the unregulated fund. Followed by SEBI’s new advisory on art funds, Osian also had a hearing with the regulator in 2008. However, in both instances, SEBI failed to revert to Osian with further communication.
Thus, the Fund continued to remain unregulated by any authority. Mr Tuli also insisted on the need for a well-managed ‘regulated’ art fund to monetise and bring to the white economy the vast cultural artefacts, most of which still exist in the cash underground economy in India.
Mr Tuli continues to be confident about art markets in India. He stressed on the need for a strong institutional framework in India for funds based on illiquid assets like art to succeed.
Speaking on plans for another art fund, Mr Tuli said, “At present, let me complete all my obligations and the rebuilding process will naturally follow.” Investors of the Osian Art Fund have received part-payments on their total investment in the Fund. However, they still await final payment of the entire amount.