IndexAtlas, an alternative assets investment firm and advisory group, has launched a $50 million (€31.4 million) private equity art fund.
The fund will invest exclusively in businesses serving the art industry such as auction houses, advisory services, financial and security firms as well as software and media companies.
The fund will not invest in art assets because valuations are difficult to calculate due to the subjective nature of the investments, according to Sergey Skaterschikov, IndexAtlas Group's founder and chief executive. He said by contrast the underlying industry has more regular capital inflows.
The firm expects the fund be fully invested no later than 31 December, 2009 and its investments will range from $3 million to $8 million. Investments are expected to last four years.
Skaterschikov said the fund aims to generate an annualized internal rate of return of more than 35 percent.
He believes the art world has lagged behind other industries in adapting to the institutionalised investment world. “In the last century the art market was pretty stable and immune to evolution while the rest of the world changed. The art market remains a pretty much open space for the investor.”
Skaterschikov said the industry surrounding the art world is now sufficiently supported by the increasing number of high net-worth individuals worldwide to guarantee stability despite changing market conditions. “There is now a critical mass of capital constantly supporting art markets. We think this is essentially a new segment of the entertainment and media industry which is not sufficiently served by independent businesses. If you look at data on the number of high net worth individuals, then there is a sustainable critical mass of capital available for investing in art.”
Beyond achieving a return, Skaterschikov aims to standardise and institutionalise the unconventional art market: “The fund's primary objectives are to bring increased transparency to art investing and to support development and expansion of lasting institutions that will serve the art world and the greater alternative investment market as a whole,” he said.
Skaterschikov established IndexAtlas, an investment banking boutique, in 2001. It has offices in New York, Moscow and Vienna.
IndexAtlas has advised on $2.4 billion of mergers and acquisitions, initial public offerings as well as private equity and debt transactions. It has more than $400 million in private equity funds under management, which is fully invested.
Last year Skaterschikov also published a book “Skate's Art Investment Handbook”. It is directed at private and institutional art investors with more than $1 million allocated to art assets. Skaterschikov recommends anyone interested in investing in his fund to read his book first.