First Round: Carlyle Group lends in the name of art

A number of private equity practitioners and grandees are renowned for their love of fine art. First Round can recount visits to buyout firms where the walls have been adorned with dazzling examples of contemporary and classic art. (At least First Round thinks some of the contemporary stuff was art, but didn’t want to pass judgment in case it showed itself up in front of its hosts…)

Collecting art would appear to be a shrewd move for private equity firms. Rather like sourcing the right deal (if one excuses the second time an analogy comparing deals with something completely different has occurred this month), if skill and judgment is exercised professionally, the chosen asset should only appreciate in value.

There are exceptions, of course. For example, it is unclear to First Round just exactly how much judgment and skill was deployed to decide that Tracey Emin’s ‘My Bed’ installation was worth its eye-popping £2.2 million ($3.4 million; €3 million) price tag when it sold at Christie’s in 2014, but First Round digresses.

When it heard that The Carlyle Group had invested $280 million into high-end art specialist lending group Athena Art Finance Corporation, First Round recognised that this was a smart way to tap into a market apparently worth up to $3 trillion a year.

According to Carlyle, which led the venture alongside the private equity unit of Swiss wealth manager Pictet, Athena will offer non-recourse loans exclusively collateralised against works of fine art.

Carlyle funded the venture from its $1 billion Carlyle Global Financial Services Partners II fund and will look to offer up to 50 percent of the low estimates of value for individual artworks or collections.

Andrea Danese, chief executive and co-founder of Athena said: “For too long serious art collectors and other market participants have been faced with limited choices when they want to borrow against art. We aim to be an independent, trustworthy and flexible source of financing for the art market.’’

So there you have it. Boutique lenders beware! Private equity is making its mark on this still relatively blank canvas.