Art Trusts Gain Favor

by xyxgyp1998 on 2012-02-07 20:06:15

Art Trusts Gain Popularity - By Reporter Li Xi

The past few months have been a great season for the financial management market. Under immense inflationary pressures, using investment returns to offset rising prices has become a unified consensus among the general public. In the trust financial management market, after experiencing fluctuations in silver trusts, securities, and real estate, the art field is beginning to become the new focus of capital aggregation.

Recently, many art trusts have matured and received excess returns, boosting investors' confidence in upcoming similar trusts. For example, the "CITIC Yudao Jade Fund Collective Capital Trust Plan" established on January 18th last year had a capital raising scale of 50 million yuan and was terminated early on January 21st this year. The trust product used the raised funds to purchase, sell jade materials, and the finished products processed from jade materials, achieving an annual return rate of 10% within one year of investment.

Similarly, the "CITIC Wenda · China Calligraphy and Painting Investment Fund Collective Capital Trust Plan (Phase 1)" announced by CITIC Trust on December 10th last year also gained significant popularity. This product raised a total of 40 million yuan in trust funds, with an expected annualized return for preferred beneficiaries of no less than 10%. It was quickly subscribed after issuance, attracting both individual and institutional investors. Recently, Beijing International Trust issued the "Maoyuan Fuya No.1 Art Investment Collective Capital Trust Plan", with a fundraising scale of 270 million yuan. Its minimum expected return rate is 10%, and for those subscribing over 20 million yuan, the return rate can even reach as high as 13%.

Industry insiders stated that due to regulatory constraints on real estate, trust companies are currently seeking alternatives, and the art investment field's value remains underexplored, hence presenting optimistic investment prospects.

Trust analyst Wang Xuecheng from Use Trust believes that the current chaos at Tianjin Cultural Exchange shows signs of excessive market liquidity, lack of sound rules, and excessive speculation. Artworks do not have the same fundamental constraints as listed company stocks, and their pricing contains a heavy subjective element. Each share price can be detached from fundamentals and be driven up sky-high, indicating that the bubble space is actually much larger than that of stocks.

"Trust companies have noticed this point, and their art investments are gradually shifting from investing in artworks themselves to the entire industry chain of art transfers and auctions," he added.

Huge Market Potential

Previously, the Private Wealth Report of China 2009 released by China Merchants Bank showed that in 2008, there were approximately 300,000 high-net-worth individuals in mainland China holding investable assets exceeding 10 million yuan RMB, with a total of 880 billion yuan RMB in investable assets. If we refer to the foreign 5% ratio calculation, 440 billion yuan in assets could be invested in the art market. However, in 2010, the total auction turnover of artworks in mainland China was only 57.3 billion yuan, indicating that the potential of this market has yet to be fully realized.

From an asset allocation perspective, researcher Zhao Yang from Pu Yi Wealth indicated that investing in art trust products can diversify risks. Since the art market does not directly correlate with the stock or property markets, it can, to a certain extent, avoid mutual entanglements.

Additionally, compared to direct personal investment in art, purchasing such products allows professional teams more familiar with art investment patterns to manage them, offering relative advantages in pricing and risk control.

However, some experts also pointed out that risks still exist in art trust wealth management products. Currently, there is a lack of recognized authoritative institutions in China for authenticating the genuineness of artworks, and the absence of an art valuation system increases the difficulty for financial institutions to price art assets. Furthermore, the lack of a unified registration information platform for details about artworks themselves, art traders, etc., and the absence of a regulatory body overseeing the art market make it difficult for trading entities to avoid risks such as non-guaranteed authenticity in auctions, non-transparent transactions, and information asymmetry.

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