Carlyle, Banque Pictet Team Up For Art Lending Venture

Oct 9 2015 | 7:57pm ET

Private equity behemoth Carlyle Group is joining forces with Geneva-based Banque Pictet to provide lending solutions to art collectors seeking to acquire new works using existing ones as collateral. 

The new venture, named Athena Art Finance Corporation, is the latest example of alternative asset managers branching out into novel areas in search of returns. 

Athena will finance the purchase of new art by wealthy collectors using pieces from their existing collections as collateral, according to an article in the Financial Times. Loans will be for at least $1 million, carry 6-month to 7-year year terms, and will be up to 50% of the value of the art being collateralized, which will in turn be subject to a range of qualification and valuation criteria.

Works from approximately 80 artists, including Francis Bacon, Claude Monet, Pablo Picasso, Gerhard Richter and Andy Warhol, are expected to qualify. 

Like much of the private debt landscape, the premise is that the loans will carry higher yields than those available through traditional fixed income market, and are protected by artworks that many contend are both uncorrelated to the broader financial landscape but also hold their value through economic cycles. The art lending market is estimated to be approximately $7 billion, according to the article, and Carlyle hopes to add liquidity to it through the Athena venture. 

The new business will be initially capitalized with $280 million in equity capital and be able to draw on bank credit lines to increase leverage. The capital will come from Carlyle’s latest Financial Services Fund, a $1 billion vehicle managed by Oliver Sarkozy from within Carlyle’s Global Financial Services division.

“The $3 trillion-plus global art market is one of the least developed and least financially sophisticated markets of substantial size in the world,” noted Sarkozy in a statement. “We will drive the institutionalization of this market. By introducing more liquidity, we think the cost of capital for these assets will go down and the value will go up.”

The new firm officially launched October 8 and reportedly already has $150 million in requests.

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