Amid rising geopolitical tensions in the Middle East, art market experts say that demand is unlikely to soften for the asset class ahead of the region’s largest sale of contemporary works this week.
Equities in the region have experienced volatility in line with world markets in recent days, hit by concern for the global economic outlook, falling oil prices and geopolitics.
“Some gains have been made on this dip already. No market is immune to its environment and we will be keeping a watchful eye,” said Michael Jeha, the managing director of Christie’s. Its sale of modern and contemporary Arab, Iranian and Turkish Art takes place on Tuesday in Dubai.
“We remain confident in the quality of the works included in the sales, with the value resting in works from private collections which are also fresh to the market, a combination which is always in demand. Our collectors are very fairly balanced between international and Middle East-based clients and we are sure that the sale will perform just as well, despite this reaction from the markets here in the region,” he said.
In its 2014 art and finance report last month Deloitte said almost half of collectors expect the Middle East art market to be flat next year, with 41 per cent expecting a drop.
“Geopolitical uncertainty in the region could weigh on the Middle Eastern art market outlook in the next 12 months. However, expansion in art and museum infrastructure, together with rapid growth in UHNWIs [ultra-high net worth individuals] and their significant allocation of wealth to treasure assets, indicates that this region is likely to play an important part in the global and regional art and collectibles markets in the future,” Deloitte said.
Two of the art world’s most famous names – the Louvre and the Guggenheim – are scheduled to open branches in Abu Dhabi over the next two years. This has stimulated the local appetite for art to such an extent that N2N gallery, based in the Emirates Palace hotel, will be opening a second gallery in Nation Tower next month.
“We sell about eight pieces a month with an average ticket price of about Dh25,000,” said Elina Virtanen, operations manager for N2N Gallery.
Salwa Zeidan, the owner of Abu Dhabi’s Salwa Zeidan Gallery, expects buyers to maintain their current levels of activity.
“Crisis makes people shift into art,” she said. “You would think no one would buy [but] we reopened the gallery in 2009 at the height of the global crisis and the UAE art market didn’t show any effects. Now when you look at Syria and Lebanon, although there are very hard times, the people are spending on art. I just came from [the] Beirut Art [show] and I was shocked at the amount of interest and the amount of business.”
Globally, the art market, rose 52 per cent from its lowest point in 2009 to reach a total of US$60 billion last year, according to Deloitte.
The Auction Rooms online Middle Eastern Contemporary Art sale this month mostly received bids from buyers in the Arab world.
“Arab people are getting excited about art from their part of the world and we’re finding that it’s not just for investment purposes, but because they love the work and want to put it on their walls,” said Janet Rady, the curator of the auction and a specialist in contemporary art from the Middle East. “It’s for the right reasons and that’s really pleasing.”
Street Art Gallery opened this June in Dubai and has already surpassed its business plan for the year.
“We sell between 20 and 40 pieces a month and are seeing a true reflection of Dubai’s residents as our clientele,” said Stephane Valici, the curator and founder of Street Art Dubai. “We focus on affordable art so between $5,000 and $10,000 is our normal ticket. We don’t get many locals in here but a local was responsible for our highest sale of €25,000 [Dh117,172]. We have seen the customer base growing as we invite artists to workshops here, our first had about 150 people and the last had easily 350 people here. There is a real passion for street art, it seems.”
Christie’s pre-sale estimate is in the region of US$6 million to $8m – it sold $8.5m at its auction a year earlier. At its March sale more than $10m worth of art was sold with a work by Abdul Hadi El Gazzar going for above $1m, setting a record for the Egyptian artist.
“International institutions are starting to buy Middle Eastern art so the appetite has been increasing,” said Mr Jeha. “The domestic market is driven by private individuals, but an increasing amount of global institution are buying into the Middle Eastern market. There are a lot of very strong artists from the region which drives interest and enthusiasm and awareness grows the more people see art, and more fairs happen and we see more returns from our auctions.”
ascott@thenational.ae
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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How will Gen Alpha invest?
Mark Chahwan, co-founder and chief executive of robo-advisory firm Sarwa, forecasts that Generation Alpha (born between 2010 and 2024) will start investing in their teenage years and therefore benefit from compound interest.
“Technology and education should be the main drivers to make this happen, whether it’s investing in a few clicks or their schools/parents stepping up their personal finance education skills,” he adds.
Mr Chahwan says younger generations have a higher capacity to take on risk, but for some their appetite can be more cautious because they are investing for the first time. “Schools still do not teach personal finance and stock market investing, so a lot of the learning journey can feel daunting and intimidating,” he says.
He advises millennials to not always start with an aggressive portfolio even if they can afford to take risks. “We always advise to work your way up to your risk capacity, that way you experience volatility and get used to it. Given the higher risk capacity for the younger generations, stocks are a favourite,” says Mr Chahwan.
Highlighting the role technology has played in encouraging millennials and Gen Z to invest, he says: “They were often excluded, but with lower account minimums ... a customer with $1,000 [Dh3,672] in their account has their money working for them just as hard as the portfolio of a high get-worth individual.”
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Auron Mein Kahan Dum Tha
Starring: Ajay Devgn, Tabu, Shantanu Maheshwari, Jimmy Shergill, Saiee Manjrekar
Director: Neeraj Pandey
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Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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What is graphene?
Graphene is extracted from graphite and is made up of pure carbon.
It is 200 times more resistant than steel and five times lighter than aluminum.
It conducts electricity better than any other material at room temperature.
It is thought that graphene could boost the useful life of batteries by 10 per cent.
Graphene can also detect cancer cells in the early stages of the disease.
The material was first discovered when Andre Geim and Konstantin Novoselov were 'playing' with graphite at the University of Manchester in 2004.
Super Saturday race card
4pm: Mahab Al Shimaal Group 3 | US$350,000 | (Dirt) | 1,200m
4.35pm: Al Bastakiya Listed | $300,000 | (D) | 1,900m
5.10pm: Nad Al Sheba Turf Group 3 | $350,000 | (Turf) | 1,200m
5.45pm: Burj Nahaar Group 3 | $350,000 | (D) | 1,600m
6.20pm: Dubai City of Gold Group 2 | $300,000 | (T) | 2,410m
6.55pm: Al Maktoum Challenge Round 3 Group 1 | $600,000 | (D) | 2,000m
7.30pm: Jebel Hatta Group 1 | $400,000 | (T) | 1,800m
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed