Osian Art Fund investors upset about ambiguity regarding NAV and closure date

Company officials claim that redemption payment will be done in three to four days, while investors fear that the funds will come in only after 30 days

The Osian Art Fund, which was to see closure on the 10th of this month, has now triggered a nasty debate between the investors and Osian company officials. While Osian’s chief advisor Neville Tuli claims the NAV has been communicated to the unit-holders, investors claim that the closing NAV was communicated only a couple of days back. There is ambiguity on the closure date as well.

“The Fund was successfully closed on 10th November with all the inventories sold. As per the redemption guidelines sent to all unit-holders, the final audit for tax certification purposes needs to be completed, which should take four to five days, and thereafter the warrants are to be immediately couriered to the unit holders. As per (our) redemption guidelines, this process has up to 10th December 2009 to complete its obligations. However, we expect to complete all these formalities much quicker. This is no new date as it was clearly conveyed to all unit holders previously,” Neville Tull said in an email to Moneylife.

“The NAV was announced on 11 July 2009, and was uploaded on the Web with all information required, and being the indicative NAV it had nothing to do with an audit. Further, in my regular notes to all unit-holders, the last dated on 8 October 2009, I clearly mentioned the NAV at Rs112.29 (cum-div),” he further added.
However, investors have a completely different story. “The date of closure of the fund was 9th July and till four months they had not announced the NAV value for 9th July. The standard reply given to us was that the audit has been going on for the last four months. The NAV was communicated to me only after a conversation with Mr Tuli earlier this week. The same was updated on the website later,” said Deepak Daftari, one of the investors in the art fund.
“As per the regular note dated 8 October 2009, received on 9 October 2009, the NAV mentioned was that ‘we have achieved an NAV of Rs112.29 (3.94% CAGR, post-tax) and Rs116.39 (5.18% pre-Tax)’. This does not say whether it is the June NAV or July NAV,” Mr Daftari added.

“It has been communicated to me that it is going to be another 30 days from 10th November, the last day of closure and now the new date is 10th December, which in itself goes against the guidelines of the Art Fund. The concerned official who said this on behalf of Osian is Raghavendra Shanbhag and he has categorically stated that the payments will not be made now as per the instructions of Neville Tuli,” said Mr Daftari.

The investor further told us that after his conversation with Mr Tuli, he has been told the funds would be distributed shortly, but no definite timeframe was fixed. The date for closure of the fund has already expired, it now remains to be seen when the funds are finally distributed to the investors.

On the sale of inventories, Mr Daftari says, “We only received notifications on the monthly NAV and the sixth-monthly reports, but have been given no concrete information, on which inventories (were sold), who were the buyers and the sellers. We were never given the exact inventories of the fund, as to what they were buying, selling and at what prices.”
- Amritha Pillay [email protected]
 

Like this story? Get our top stories by email.

User

Undeterred by poor returns and liquidity, Osian Art plans another art fund
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.
 - Amritha Pillay [email protected]
 
Like this story? Get our top stories by email.

User

Before You Buy Gold…
Citibank’s investment arm recently published a report which suggests that gold prices could climb to well over US$2,000 an ounce.

Given the current prices of under US$850 an ounce, this means that gold prices could more than double. Does it mean that gold is a good investment idea? Well, it depends on how you view gold and also on how you invest in it.
 
First, gold has generally been a...
Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital Access

Subscribe

Moneylife Magazine Subscriber or MAS member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

online financial advisory
Pathbreakers
Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
online financia advisory
The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Online Magazine
Fiercely independent and pro-consumer information on personal finance
financial magazines online
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
financial magazines in india
MAS: Complete Online Financial Advisory
(Includes Moneylife Online Magazine)