A new kind of asset

ART: Osian's Art Fund aims at establishing art as a stable and sustainable asset class.

Fancy your chances as an art investor but simply don't have the savoir-faire or the ever-escalating monetary prerequisites to take the plunge?

Emerging Art funds are gaining a foothold in the buoyant Indian mutual funds market, and might just be your answer to owning a Gaitonde... or at least a part of it.

You may not be able to display it on your walls, but you will be riding the wave of the recent record breaking successes of Indian contemporary masters, and turning a sizable profit.

The Osian's Art Fund is at the start line. The fund is the art institution's attempt to drive Indian Art towards regularisation as a secure financial asset.

"Regulations, are still 18-24 months away," estimates Neville Tuli, chairman, Osian's, "but we will still function at the highest level of public Accountability."

Art investment has always been plagued with issues of transparencies of valuation and pitfalls of trading. Individual trading in Art is always risky, when knowledge base is poor according to Tuli (Osian's recently launched its Art Index, an attempt to objectively track the performance of leading Indian artists).

Moreover, an institutional platform would absorb the standard commission rates of 15-20 per cent and the capital gains tax, a bulky pay out for Art traders. Osian's instead extracts a three per cent management fee and offers a 70-30 income split between the investor and the art fund manager.

"I would be very disappointed if the fund yielded returns of anything below 35-40 per cent," says Tuli.

The fund thus capitalises on the early days of a swelling Rs 850 to Rs 1,000 crore market (not including the cash component). "British art funds are content with 10 to 15 per cent returns, we have at least another ten years before that happens," he continues.

With several of Osian's 750 clients ready to put their money where Tuli's mouth is, the initial fund size is expected to be Rs 100 to Rs 125 crore. With a lock in period of 36 months, and a regular income flow generated every six months, Tuli is also hoping to prove Art is relatively liquid.

Like any fund, it will be the fund manager's prerogative where bets are placed. The focus will be on time-honored South Asian masters. "Our job is not to speculate on new talent. That's the job of the gallery owner," says Tuli.

Osian's isn't the first mover in the business. Banks caught onto it a few years ago "" Citibank, Kotak and ICICI have all initiated interest in the art investment market, and involvement ranges from recognizing art as collateral to offering advisory services to investors and even similar art funds in the making.

"However, only when the public sector takes up the issue of securitisation will art really take roots as an asset class," states Tuli.

Three to four years down the line, the fund hopes to perpetuate the currently impossible trickle down effect of the Great Indian Art Trick.

"It's my 10 year vision whereby you'll be able to put in Rs 1,000 and buy 10 units in a Tyeb Mehta." For now, the minimum investment is set at Rs 10 lakh.