Manager Update - Q3 2019


Dear Readers,

Last quarter I discussed how US equity markets rallied strongly, massively outperforming the MSCI world. I questioned how long the trend would sustain. In fact, already in the 3rd quarter, it slowed down markedly, with both indices up only slightly by roughly 1%. The US still outperforming but by a very narrow margin. In parallel to these subdued equity markets, we’ve witnessed a further drop in USD yields in the third quarter. 10-year treasury yields dropped from 2.68% at the beginning of the year, to 2% at the beginning of the third quarter and down to 1.66% by the end of the quarter. It seems that the boost in economic confidence since Trump’s election is finally waning.

ART MARKET UPDATE - to October 20th

July and August were traditionally uneventful for the art market, with no major art fairs or auctions. Our main focus in the office was to review our logistics infrastructure and implement a new strategic agreement with G4Si Fine Art across multiple centers, resulting in substantial cost savings, streamlining operations and better ongoing control of inventories. I also took some time to explore the burgeoning LA art scene; with its multiple museums, an explosion of mega gallery spaces and the flourishing of young experimental spaces, LA has become a top 10 global art destination. A short European trip in September took me to 5 cities in 5 days: Frankfurt, Hamburg, Amsterdam, Brussels and Cologne for a combination of gallery weekends, storage visits, business meetings and catching up with artists and other old friends.

Jeff Koons, Tulips, 1995-2004, The Broad Museum, Los Angeles. Photo: Serge Tiroche.

Ugo Rondinone installation at the Marciano Collection. Courtesy the artist. Photo: Serge Tiroche.


Yayoi Kusama's "With All My Love For The Tulips, I Pray Forever", 2011, at Marciano Art Foundation. Photo: Serge Tiroche.

With the weakening economic outlook as a backdrop, the resumption of auctions in NY in September was met with trepidation, but the smallish sales did better than some feared and projected a stable market. It wasn’t until the HK auctions in early October, followed directly by the London auctions, that the trepidation gave way to a "business as usual" attitude, with a healthy and selective market. Here and there some especially ‘hot’ artists filled rooms and media with some exciting moments.

In HK, despite serious demonstrations and widespread social unrest, the auctions continued apace with another incredible result for a comic-inspired artist. Following a record KAWS that sold for $14.7 million at Sotheby’s HK in April, the same house sold a Yoshimoto Nara for $24.9 million in early October, eclipsing the artist’s previous $4.45 million record - a sign of the evolving taste of a younger generation of collectors, particularly in Asia. A Banksy painting “Devolved Parliament” followed suit by selling for over $12 Million at Sotheby’s London, smashing the artist’s previous record of less than $2 million. So in addition to black American, African, female and LGBQTI that were already hot sectors of the contemporary art market … Street Art, Manga, and comics are officially the new hot-spots.
With a hard Brexit looming, the UK post-war and contemporary (PW&C) evening auctions could have easily turned out to be the beginning of the long-awaited correction, but thanks to a few major lots, Christie’s, Sotheby’s and Phillips managed to raise a combined GBP 121 million, comfortably surpassing the GBP 110 million low estimate. To put things in perspective, however, that total marked a substantial 15% contraction vs. the equivalent 2018 season. Christie’s was again the best performing house in London, reporting a superb 90% sell-through rate by volume and 95% by value for the PW&C auctions, while Phillips’ market share continued to rise, reaching 20% of season totals.  

The other gauge of the market, Frieze London, reported: “160 galleries from 35 countries - the fair’s most international edition to date - drove excellent sales, with a record number of museum groups and curators”. After a short break, it was the turn of FIAC in Paris, where there was quite a bit of optimism that London's losses would stand to be Paris' gain. The sentiment was boosted by the opening of David Zwirner's new gallery as well as the opening of Komunuma - a new cultural complex in Romainville with several galleries, exhibition spaces, artist studios, and an art school. While there, I organized a fun day in collaboration with Asia Now, where I also participated in a panel discussion, moderated by Melanie Gerlis, about the art markets in Asia, focusing particularly on the contemporary market in China.

Opening at October gallery during 1-54 / Frieze, with works by Cyrus Kabiru, facilitated by Africa First. Photo: Serge Tiroche.

Damien Hirst "Mandalas" at White Cube Mason's Yard, London, on view through November 2, 2019. Photo: Serge Tiroche.

Mark Bradford at 'Cerberus', Hauser & Wirth, London, on view through December 21, 2019. Image courtesy by Serge Tiroche.

Moderator Melanie Gerlis, art market columnist for the Financial Times and Editor at Large for The Art Newspaper; Fang Fang, Founder of Star Gallery Beijing; Thomas Eller, Founder of Gallery Weekend Beijing and Artistic Director of “China Arts & Sciences” in Jingdezhen; and Arianne Piper, art advisor. Image courtesy by Observascope.

Moderator Melanie Gerlis, art market columnist for the Financial Times and Editor at Large for The Art Newspaper; Fang Fang, Founder of Star Gallery Beijing; Thomas Eller, Founder of Gallery Weekend Beijing and Artistic Director of “China Arts & Sciences” in Jingdezhen; and Arianne Piper, art advisor. Image courtesy by Observascope.


As expected the 3rd quarter was slow in terms of sales. In total, we offered 11 works at auctions with 8 selling for a total of $240’000. Our Gross IRR on these sales was 5.82% which was low compared to our since inception Gross IRR on sold works of 14.58%.
Our best performing sale this quarter was a work by Eddy Kamuanga Ilunga which featured on the back cover of the Sotheby’s African auction in London on October 15 and sold for GBP 50’000, producing a Gross IRR of 65%.
Our worst performing sale was a work by Boris Nzebo at the same auction which sold for GBP 4’000, producing a Gross IRR of -14.60%.
We continued to work on private sales and completed the consignment of 3 new works for private sale and extended the consignments of 3 others. In addition, we produced a large document with Museum befitting works from the collection and started our direct Museum outreach initiative.


As the fund is currently in its winding downstage, in addition to artwork sales, we are encouraging our investors to consider redemptions in kind. One of our ambitions at the outset of the fund was for our investors to develop a real curiosity for art. We believe that at least for some of them, the involvement in the fund has yielded this additional benefit. We are encouraged that some have found works in the collection that they now wish to own outright and enjoy in their homes. We are pleased to share that in addition to cash redemptions we are making to investors, the process for in-kind redemptions will also begin during 2019.

I look forward to your thoughts and wish you all a delicious fall season. Enjoy your Ski, our beaches or just mother nature… and some great art.

Very best wishes,

Serge Tiroche, co-founder