Many people in the industry believe that there is a certain bubble in the current art market. The value of the art itself does not match the current market price. There may be little correlation between art trusts and the value of the art. Moreover, from the perspective of art trust product design, although some art trusts have designed priority income rights, making art trusts more similar to fixed-income products and reducing investors' risks, the reality is far from that simple. In fact, generally preferred beneficiaries or limited partners can only obtain a pre-agreed rate of return, and all excess returns belong to the investment consultant and are not shared with investors. In other words, no matter how high the returns of alternative investments end up being, investor returns cannot increase.
When choosing an art trust, you should choose a strong investment consultant. When it comes to art fidelity evaluation, you should evaluate it yourself before looking for other professional institutions to evaluate it. It is best to choose a group guarantee with greater strength. Art trust products or related products launched by banks.
Due to the vast diversity of the art field itself and the lack of market-oriented pricing and transaction transparency, the specific methods of project operation for this type of products are also very different. It is difficult to have a clear definition like real estate trusts, equity pledge trusts, etc. operating mode, it is recommended that investors treat and select such products with caution. Of course, if there is a strong guarantor and a relatively simple debt relationship behind the art trust product, so that the risks of the entire product can be identified and controlled, appropriate intervention can still be made. However, whether the art market can truly make breakthrough progress in the direction of trust in the future depends on the transparency and establishment of a standard system in the identification, pricing, circulation and other aspects of art. On June 18, 2009, SDIC Trust Co., Ltd. launched the "SDIC Trust·Shengshi Treasure No. 1 Poly Art Investment Collective Fund Trust Plan" to purchase the income rights of famous paintings by several famous painters, marking a milestone for domestic trust institutions. Officially involved in the field of art investment. Since then, driven by SDIC Trust, more and more trust companies have begun to get involved in the field of art investment. However, there are various valuations of art, and there is no unified and transparent price mechanism.
Hua'ao International Trust issued a "Hua'ao Changcheng No. 1 - Cultural and Art Treasures Liquidity Fund Trust" (hereinafter referred to as Hua'ao Changcheng No. 1) on April 8 this year. The trust client is Gangtai Group Co., Ltd., which is the largest shareholder of Gangtai Holdings (600687), with a shareholding ratio of 17.49. The artworks delivered this time are divided into five categories: oil paintings, Chinese paintings, calligraphy, sculptures and auction collections, with a total of 585 pieces in the collection. According to the data, the trust scale of Huaao Changcheng No. 1 is 406.455 million yuan, which is mainly used to invest in mining companies affiliated to Gangtai Group. The annualized rate of return is between 6.5 and 8.5, and the main source of repayment is Gangtai Group. The actual controller Xu Jiangang "promises to purchase all the artworks delivered to the trust at a premium upon maturity." It is worth noting that the batch of artworks pledged by Xu Jiangang was valued at 406.455 million yuan, but Sino-Ao International Trust did not disclose who valued this batch of artworks? What is the reasonable basis for the valuation?
Artworks The risk of value assessment mainly comes from the fact that there is no unified standard system for art value assessment in the domestic market. Currently, art price assessment can only rely on so-called experts and large institutions, which is highly subjective and leads to chaos in the art market. Judging from the data on the public transactions of some of my country's contemporary artworks in domestic and foreign auction houses, the prices of some artworks can triple or quadruple in two years, and the valuations of some works often increase dozens of times in one year. This shows that there is still a lack of regulation in intermediary links such as art valuation. It is not impossible for companies to collude with experts and trust companies to inflate the price of art. According to the operation methods, the current domestic art trusts can be roughly divided into three models: financing, investment and management.
Just like securities investment products, art trusts will also have an investment consultant, who is mainly responsible for appraising the value of the art and making investment recommendations. Throughout the establishment of the trust plan, the investment decision-making committee composed of the trust company and the investment advisor issued instructions to purchase art.
Although trust companies and investment consultants try to reduce valuation risks as much as possible, since there is no recognized and authoritative institution for art appraisal and valuation, the "Trust Company Collective Fund Trust Plan Management Measures" does not require investment consultants to The risks involved in making clear responsibilities agreement or avoidance of association cannot be ignored.
The "SDIC Trust Feilong Art Fund No. 15 Collective Fund Trust Plan" that was just established in early September 2011 stipulates that the investment consultant China Guardian International Auction Co., Ltd. provides unconditional support for Huayu Century's repurchase obligations. Irrevocable joint and several liability guarantee. On the surface, the risks are borne by investment advisors, but in fact not all investment advisors can control risks. The investment consultant of Shengzhuang Fuwen is Xiamen Tuowen Cultural Communication Co., Ltd. (hereinafter referred to as Xiamen Tuowen), and Xiamen Tuowen is a subsidiary of Contemporary Group. In other words, Xiamen Tuowen, which is supposed to be an independent third party to judge the artworks pledged by Contemporary Group and provide investment suggestions, is actually a subsidiary of the client. The existence of this relationship makes the role of investment consultant useless. .
The investment consultant only assumes limited liability within the scope of the registered capital. “If Xiamen Tuowen’s registered capital is only 10 million, but the trust project raises 300 million, then he will take the remaining 290 million. The compensation cannot be paid. Many works of art have bubble elements, and most people do art for the purpose of speculation. Therefore, the role of an investment consultant is very important. It should play a role in protecting trust investors, but if it is a client, A subsidiary of the company, where does this protection start?”
Currently, when trust companies issue art trusts, most of them do not carefully examine the origin of the client’s artworks, and the valuations are basically based on recent auctions. The company's average level, or entrust an investment consultant to conduct an evaluation. The risk here is that the price bubble is overvalued. In order for an art trust to eventually realize its value, the invested art must be liquidated. The realization of artworks is a systemic issue, involving various factors such as time, identification, channels, preservation, and market environment. Problems in any link will affect the realization of collections.
Huaao·Changcheng No. 1 stipulates that "the secondary beneficiary promises the authenticity of the artwork. If the underlying artwork is identified as a fake, the secondary beneficiary shall bear full liability for compensation. Gangtai Group guarantees joint and several liability for compensation; if the loss of the artwork results in loss of trust property, Shanghai Gangtai Cultural Development Co., Ltd. and Gangtai Group shall bear full liability for compensation.”
Proton One. The plan shows that the art purchased by Yayingtang will be stored in its own customized art storage space, and a professional team will provide professional care for the art.
However, even this setting is full of doubts. Who will guarantee the authenticity of the art purchased by Yayingtang? Who will guarantee that the art stored in its art storage space must always be authentic and that there is no tampering during the storage process? At present, the development of the art trust market is restricted by the environment. First of all, there is a lack of a recognized authoritative organization to identify the authenticity of artworks, which makes it difficult for financial institutions to invest or mortgage financing on artworks. It is difficult to identify the authenticity of artworks. Secondly, the penalties for counterfeiting under current regulations are low and the market is not standardized, which makes the current art market confusing and difficult to distinguish between genuine and fake. Finally, although there are many institutions currently providing authentication services for artworks, their authority is often questioned. This has resulted in poor sales of Chinese paintings, calligraphy, antiques and other artworks in the international market and low prices. On the other hand, it has also affected the development of financial businesses such as art trust investment and art mortgages.
Such an environment can easily breed more price bubbles in the art auction market, which is already not transparent enough. Management art trusts are the most uncontrollable risk in the interest chain.
Yongyi Trust Studio’s explanation of managed art trusts is “a trust model that contracts artists, then promotes and hypes them, increasing the artist’s appreciation space, and ultimately exits with a profit.”
Specifically, it means buying low and selling high, and then liquidating it at the expiration of 5 years. The proceeds will be returned to investors in accordance with the provisions of the trust document.
This product is also somewhat similar to a managed trust, increasing the appreciation of contemporary artists.
The person in charge of an auction company in Jiangsu said that inflating prices is a common tactic used by most auction companies and buyers and sellers in secret operations. "This is a common trick. One is to attract attention, and the other is to set the stage for the next auction." The price basis is waiting for real buyers to appear, so it is very unscientific to use auction prices to measure the value of artworks. However, there is indeed no standard for measuring the price of artworks. As long as you negotiate with the auction company, the price will be inflated. It’s very easy.”
Statistics show that in the first half of 2011, art trust issuance was mainly concentrated in Beijing and Shanghai, while in 2010, all art trust issuance was in Beijing. It can be seen that the current art trust market still has some regional characteristics.
The main reason why most products are issued in Beijing is that relying on Beijing’s status as an economic and political center as well as a cultural and artistic center, Beijing auction houses headed by China Guardian and Beijing Poly account for most of the domestic auction industry. In Jiangshan, most art trusts are issued by trust companies in Beijing in cooperation with art institutions.