I am generally office bound at work, but occasionally I am let out for a day or two! In February, I represented the Sovereign Art Foundation at ARCOmadrid, which is one of Europe’s most important art fairs. The event was well attended by buyers and collectors from around the world, and it was a hugely rewarding experience for an amateur art enthusiast like me.
The fair took place just after Picasso’s “Femme assise près d’une fenêtre” sold for £28.6m at Sotheby’s in London, where a further 18 sale lots raised more than £1m. The pieces at ARCOmadrid may not have been in quite the same league as those executed by Málaga’s favourite son, but I was struck by the “full” prices being demanded. It set me thinking as to why the art market should be thriving even at a time of financial stress.
In Gibraltar we enjoy a very well-established art scene and can boast an impressive number of first class artists. Several art groups – including Gibraltar DFAS with which I am associated – cater to the ever-growing public interest. Despite the downturn, I know several local collectors who continue to acquire art, much of it locally produced. Whilst it’s true that many artists around the world live from hand to mouth, it’s also clear that, here in Gibraltar at least, there is a living to be had from art.
Whilst the economic crisis has affected millions of people globally, there remains a great deal of cash available – if you know where to look for it. Much of this is corporate money, stashed on balance sheets around the world, but rich people – many of whom buy art – are still rich. Some have seen their wealth seriously eroded in recent years but others continue to do very well. Art offers a potentially attractive investment for a proportion of that wealth.
Interest earned on traditional bank deposits remains pitifully low – and some say this is likely to be the case for years to come. Equities are volatile – although several world “bourses” or stock markets have notched up impressive gains in recent months. When you ponder the possible choices available to a wealthy investor, it becomes rather easier to see why art might make an attractive alternative investment.
In a Gibraltar Magazine column a couple of years ago, I set out a few reasons why one might consider entering the art market as an investment. For the wealthy, successful entrepreneur, a lot of what I said then till holds true today – maybe it always has done so. But what about ordinary people like me who are interested in art but don’t have millions at their disposal. Is there scope for us too to combine that interest with investing?
There are some obvious areas to consider at the outset: the artist; the subject; the medium; the cost (not be confused with value); and the extent to which you have market knowledge and a discerning eye. All this may lead you to seek the advice of an art professional. Collecting should be fun but if you are also intending it as an investment, caution should be exercised.
So how do I go about it myself? My budget is limited so the question I ask before adding to my modest collection is always the same. Can I imagine having the piece hanging on my wall for many years to come? A year ago, I was passing the rather excellent Gibraltar Art Gallery and there was a piece in the window that simply had my name on it (not literally of course) or, to be more accurate, my partner’s name. Sure enough, after a couple of days’ deliberation we decided we just had to have it and soon another picture was hanging on our walls. So why did we do it? Was it because it might be worth considerably more in years to come? No. We bought it because we liked the piece and, as the Gibraltarian artist who painted it knows very welI, we have since come to love it.
That’s not to say that amateurs cannot be lucky. Two decades ago at a Fuengirola rastro (or street market), I bought a piece from a struggling artist who has since gone on to find critical acclaim and commercial success. The piece that I purchased for hardly any money – my weekly grocery bill cost more – is today worth the price of a small car. But am I likely to sell it? No fear. It’s part of the family now. Although it could be described as a “marmite” work – you either love it or hate it – everyone who visits us comments on it and we can’t imagine being without it.
So when acquiring art perhaps the first consideration should be “why”? If it’s to enjoy and hang on the wall, then forget the idea of selling it for a quick profit. If on the other hand, one imagines that a particular artist is going to sell very well in the future then acquiring one or more pieces early on in their career is likely to be a good move.
The second consideration should be where to put it. Storage might be the only option but I would always say “on display” for people to enjoy. And if not just for you and any visitors to your house, then you could consider reaching a wider audience in a gallery or on loan to a private or public collection. The latter may of course also help to enhance the provenance and value of the work as well as the reputation of the artist, however you should be careful to ensure that your ownership is watertight before undertaking such a move. Insurance is equally important. Protection from fire or any other catastrophic event is of course necessary, but so is the security risk.
There are also ways to get involved in the art market without necessarily buying the pieces themselves. In the same way that one can get invest in the gold market without purchasing “physical” metal, there are several specialist funds that invest in art. An individual investor is in fact buying into the fund which is itself undertaking the art purchase. I have even come across funds that allow investors to temporarily “borrow” pieces from the fund. It’s obviously not the same as owning the piece outright but, like car clubs, it may give you an opportunity to enjoy something that would usually be beyond your budget and which you can change when the mood takes you.
So is art a sensible investment to consider in uncertain times? As regular readers will know I can only express my personal opinion. Under the right circumstances, art is well worth considering as an alternative asset class, particularly for large investment portfolios. Exposure to the art market may also provide useful diversification.
As an art enthusiast, I’ve always felt that art can teach you so much about the world – a bit like the stamp collecting of my childhood. Owning a piece – any piece – can be a joy in itself. Acquire something you like; if the value increases over time, so much the better. If you are like me you will simply grow to love the pieces and never want to part with them, so the investment side becomes less critical.
A wealthy Hong Kong-based friend is a passionate collector. Even with more than one home, he has run out of space to house his collection. Once I asked, “why not dispose of some pieces?” His withering look by way of reply taught me that even sophisticated connoisseurs get to love their art. There is something out there for everyone on the art scene; I encourage you to take a closer look.
Thursday, March 21, 2013
Offshore Solutions
Sovereign was established in Gibraltar in 1987 and now the company has offices in all the major international finance centers. It has a total of 27 offices till date with offices in Bahrain, Dubai, Gibraltar, Isle of Man, Cayman Islands, British Virgin Islands, etc. Sovereign currently manages over 7,000 structures for a wide variety of clients worldwide. The majority of the clients are individuals, expatriates, entrepreneurs, freelance consultants, private investors, or wealthy persons and their families. Sovereign have developed a wide range of supporting services embracing asset management, corporate finance and fund raising, specialist tax advice, ship and yacht registration, insurance broking, credit cards, as well as trademark and intellectual property registration and protection. Offshore Companies are often demonized in the media, which paints a picture of investors illegally stashing their money away in banks located on an obscure Caribbean island where the tax rate is next to nothing. While it’s true that there will always be instances of shady offshore deals, the vast majority of offshore investing is perfectly legal. In fact, depending on your situation, offshore Companies may offer you many advantages. Such as:
Minimizing Taxation: Offshore companies established in low or zero tax jurisdictions may reduce, delay or even completely eliminate the tax burden on the company.
Holding Company: The offshore company can easily hold shares in Bahraini Companies (As WLL or SPC), and in other companies outside Bahrain at the same time. So it can act as A Holding Company for an individual`s shares in different entities. The following diagram illustrates the example.
Asset Protection: Placing your personal assets into a separate legal entity is generally a good idea whether you place them in a traditional company within your home country or you place them in an offshore company. Offshore centers are popular locations for restructuring ownership of assets. Through trusts, foundations or through an existing corporation individual wealth ownership can be transferred from people to other legal entities.
Simplicity: One often overlooked aspect of offshore company incorporation is the relative simplicity of the process. Offshore company formation in many jurisdictions is a quick and seamless process and Sovereign aims to make your offshore incorporation as simple as possible. Additionally, ongoing requirements for offshore companies are often more relaxed than for “onshore” companies.
Confidentiality: Many offshore jurisdictions offer the complimentary benefit of secrecy legislation. These countries have enacted laws establishing strict corporate and banking confidentiality. If this confidentiality is breached, there are serious consequences for the offending party. An example of a breach of banking confidentiality is divulging customer identities; disclosing shareholders is a breach of corporate confidentiality in some jurisdictions
Which are the most popular offshore jurisdictions? British Virgin Islands (BVI), Ras Al Khaima (UAE), Hong Kong, Seychelles, and Cayman Islands. What makes the British Virgin Islands such prime location for offshore banking? British Virgin Islands (BVI) are a British dependency located in the Eastern Caribbean; the government is stable and promises to remain that way. There is a good commercial and professional infrastructure and the government is actively encouraging the development of the offshore finance business. BVI became the clear market leader for corporate services in the Caribbean after the introduction of the International Business Companies Act in 1984 which created the International Business Company (IBC). This IBC became the industry preferred offshore company.
BVI Company Characteristics - Shareholder: A minimum of one shareholder is required, any nationality.
- Directors: A minimum of one director is required, can be the shareholder.
- No Taxation
- No cash capital required
- No Physical Office required
- Incorporation time 48 hours
- Business activity can be one or more at the same time.
- Very useful tool to hold shares, open a bank account, set-up a representative office in Bahrain, own assists, property, yacht, piece of art etc.
- Total incorporation fees including first year government fees in around: BD700 with no hidden costs
Minimizing Taxation: Offshore companies established in low or zero tax jurisdictions may reduce, delay or even completely eliminate the tax burden on the company.
Holding Company: The offshore company can easily hold shares in Bahraini Companies (As WLL or SPC), and in other companies outside Bahrain at the same time. So it can act as A Holding Company for an individual`s shares in different entities. The following diagram illustrates the example.
Asset Protection: Placing your personal assets into a separate legal entity is generally a good idea whether you place them in a traditional company within your home country or you place them in an offshore company. Offshore centers are popular locations for restructuring ownership of assets. Through trusts, foundations or through an existing corporation individual wealth ownership can be transferred from people to other legal entities.
Simplicity: One often overlooked aspect of offshore company incorporation is the relative simplicity of the process. Offshore company formation in many jurisdictions is a quick and seamless process and Sovereign aims to make your offshore incorporation as simple as possible. Additionally, ongoing requirements for offshore companies are often more relaxed than for “onshore” companies.
Confidentiality: Many offshore jurisdictions offer the complimentary benefit of secrecy legislation. These countries have enacted laws establishing strict corporate and banking confidentiality. If this confidentiality is breached, there are serious consequences for the offending party. An example of a breach of banking confidentiality is divulging customer identities; disclosing shareholders is a breach of corporate confidentiality in some jurisdictions
Which are the most popular offshore jurisdictions? British Virgin Islands (BVI), Ras Al Khaima (UAE), Hong Kong, Seychelles, and Cayman Islands. What makes the British Virgin Islands such prime location for offshore banking? British Virgin Islands (BVI) are a British dependency located in the Eastern Caribbean; the government is stable and promises to remain that way. There is a good commercial and professional infrastructure and the government is actively encouraging the development of the offshore finance business. BVI became the clear market leader for corporate services in the Caribbean after the introduction of the International Business Companies Act in 1984 which created the International Business Company (IBC). This IBC became the industry preferred offshore company.
BVI Company Characteristics - Shareholder: A minimum of one shareholder is required, any nationality.
- Directors: A minimum of one director is required, can be the shareholder.
- No Taxation
- No cash capital required
- No Physical Office required
- Incorporation time 48 hours
- Business activity can be one or more at the same time.
- Very useful tool to hold shares, open a bank account, set-up a representative office in Bahrain, own assists, property, yacht, piece of art etc.
- Total incorporation fees including first year government fees in around: BD700 with no hidden costs
Safeguarding Wealth
Making a will is often a sensible way for an individual to put his or her affairs in order. But the administration of a deceased’s estate can often be costly, can result in long delays and very often involves a large bill, especially in the UAE. Setting up a trust, on the other hand, can eradicate delays, costs and protect assets from future creditors as well as provide anonymity.
What is a trust and how does it work? Setting up a trust is a better alternative to making a will during one’s lifetime. A trust is a financial tool whereby property is transferred from one person (the settler) to another (the trustee), who holds and administers it for the benefit of specific beneficiaries. The assets are managed by the trustee or the team of trustees, as per the terms and conditions of the trust deed, which also lays down the rights and interests of the beneficiaries.
What are the merits of setting up a trust? With a trust, you can make any number of arrangements for the distribution of your assets in a very convenient and flexible way. You may wish to provide a course of income for your spouse or make provision for the education of your children. A trust can also be used to overcome forced inheritance claims, a particular problem in countries of Islamic tradition.
How far does a trust assist in asset protection? A common motivation for establishing a trust is to preserve family assets against mismanagement and spendthrifts. An individual may want to ensure that the wealth accumulated over a lifetime is not dissipated or divided up, but is preserved as one fund. The fund can then accumulate further with provision for payments to the members of the family as necessary, preserving some assets for later generations.
How is the trust structure relevant for family business? Setting up a trust may ensure that the business built by the settler will continue after their death. If the company shares are transferred into a trust prior to the death of the settler, the unnecessary liquidation of the family business can be prevented. In case family members have little business experience, the trustees can be instructed to retain the business, keep the company running and provide payment to members of the family from dividend income.
Will a trust assist in holding international property? A portfolio of international property can be held under one single trust. In some circumstances, depending on local laws, a ‘local company’ may be required to set up under the trust (i.e. it’s common for a Jebel Ali Offshore company to hold Dubai Freehold property, and have a Trust acting as a shareholder of the company).
How does one determine the credentials of trustees? Reputable and well-regulated jurisdictions such as Gibraltar have been found at the forefront of best practices in the area of trusts. Professional trustees are required to be licensed, use the Financial Services Ordinance 1989 and are regulated by the Financial Services Commission (FSC). Sovereign Trust International Ltd is one such licensed professional trustees. The company is regulated and covered by professional indemnity insurance. Vikrant Pangam is a Trust and Estate Planning Specialist and Managing Directory at Sovereign Group’s office in Abu Dhabi. The opinions expressed by the author are his own.
What is a trust and how does it work? Setting up a trust is a better alternative to making a will during one’s lifetime. A trust is a financial tool whereby property is transferred from one person (the settler) to another (the trustee), who holds and administers it for the benefit of specific beneficiaries. The assets are managed by the trustee or the team of trustees, as per the terms and conditions of the trust deed, which also lays down the rights and interests of the beneficiaries.
What are the merits of setting up a trust? With a trust, you can make any number of arrangements for the distribution of your assets in a very convenient and flexible way. You may wish to provide a course of income for your spouse or make provision for the education of your children. A trust can also be used to overcome forced inheritance claims, a particular problem in countries of Islamic tradition.
How far does a trust assist in asset protection? A common motivation for establishing a trust is to preserve family assets against mismanagement and spendthrifts. An individual may want to ensure that the wealth accumulated over a lifetime is not dissipated or divided up, but is preserved as one fund. The fund can then accumulate further with provision for payments to the members of the family as necessary, preserving some assets for later generations.
How is the trust structure relevant for family business? Setting up a trust may ensure that the business built by the settler will continue after their death. If the company shares are transferred into a trust prior to the death of the settler, the unnecessary liquidation of the family business can be prevented. In case family members have little business experience, the trustees can be instructed to retain the business, keep the company running and provide payment to members of the family from dividend income.
Will a trust assist in holding international property? A portfolio of international property can be held under one single trust. In some circumstances, depending on local laws, a ‘local company’ may be required to set up under the trust (i.e. it’s common for a Jebel Ali Offshore company to hold Dubai Freehold property, and have a Trust acting as a shareholder of the company).
How does one determine the credentials of trustees? Reputable and well-regulated jurisdictions such as Gibraltar have been found at the forefront of best practices in the area of trusts. Professional trustees are required to be licensed, use the Financial Services Ordinance 1989 and are regulated by the Financial Services Commission (FSC). Sovereign Trust International Ltd is one such licensed professional trustees. The company is regulated and covered by professional indemnity insurance. Vikrant Pangam is a Trust and Estate Planning Specialist and Managing Directory at Sovereign Group’s office in Abu Dhabi. The opinions expressed by the author are his own.
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