Ya Hui Wang’s When I Look at the Moon. (Photo Provided to China Daily Asia Weekly)
Artists throughout the centuries have found that patience is a virtue. Rather than selling early and cheap, if they wait for their work to gain recognition they can reap richer rewards. But there is a catch. Few artists can afford to wait for the money to come in. Some sort of a safety net is needed.
Enter APT or Artist Pension Trust, an organization that offers both long term financial security and international exposure to select artists.
Hamilton Tang is the director of APT Beijing, the Asian arm and fastest growing trust of APT. He is also the group CEO of Simon Murray & Company (SMC), a pan-Asian investment firm.
Tang was formerly co-CEO of a private regional media and entertainment firm engaged in Chinese-language films and multiplex cinemas across Asia, so he has first-hand experience of the arts and entertainment business in the region.
"As an investment management firm, (SMC) has always been interested in art as an asset class but I have never been moved by art funds because I have had experience in my prior life when we did a film fund,” says Tang. He is also well aware of the risks of investing in the sector.
"I personally think it is very difficult to entrust the selection of art or films to a single person or a small number of people and say: ‘Right, we are going to acquire these works now and hopefully after that we can sell them and make more than what we paid.’ The risk rewards are not as attractive to me.”
APT, however, has a different business model. The trust does not buy art but accepts scheduled contributions over 20 years by selected artists. In return, shareholders like SMC finance operations, logistics, storage and day-to-day management of these works. The pieces continue to be available for display while they are being held by the APT.
"There is no other solution in the market that I know of where the trust is based on payment in kind by artists and second, offers a valuable service by securing the artists’ financial future,” says Tang.
APT Beijing opened in 2006. Before SMC officially came on board last year, Tang traveled all over Asia for more than six months from 2011-2012 and met with around 25 artists. Now APT Beijing is fully subscribed, with 250 artists.
"I realized (from these tours) what APT had already achieved,” he says. “Not only was it a clever idea but they were already working with talented artists and passionate curators. I think the proof is in the pudding in terms of … how big it is, and there is nothing else like it in the world.”
SMC is a Hong Kong-based management company focusing on direct investment, fund management and investment advisory. Despite SMC’s vast networks, though, Tang strikes a note of humility.
"We know enough not to get in the way of the selection of artists and artworks because that is not our area of specialty and training,” he says.
"But I am seeing a convergence between the business world, the art world and high-net-worth collectors and patrons, so I think we can help open doors for APT.”
For example, a panel discussion in May at Hong Kong’s Art Basel fair on “Commerce and Creativity” featured APT’s Dan Galai and other heavyweights from the art world. Meanwhile, in October there will be an exhibition of Japanese APT artists before the opening of the London Frieze.
To date, no art has been sold but that is by design, based on two core beliefs of the trust. APT’s cash distribution breakdown was formulated by Galai, one of its co-founders and an avid contemporary art collector. Also a mathematician, he invented the volatility index for the Chicago Board Options Exchange.
Galai has studied art values and based APT’s financials on algorithms and data he collected. He came up with two obvious non-mathematical conclusions that are at the heart of the trust.
One is that art takes time to maximize its value.
"Art, like wine, appreciates over time,” explains Tang, “The purpose of APT is not to accept artworks today and sell tomorrow. In that sense we would be shortchanging their pensions because we rushed to sell. Historically, the value of art is maximized over a period of time. So we need patience.”
Two, there is value in numbers and diversification.
"If history is to be an indicator, it would be very difficult for an artist to reach superstardom in the art world,” says Tang. “Everyone works hard, everyone is talented but the reality is, historically, a very, very small percentage reach Damien Hirst-like levels of commercial success,” he says, referring to the internationally renowned British artist.
"What APT is providing is a risk diversification method where you will share in the future commercial value of other people’s works because history clearly shows that your odds of being the next Damien Hirst are very, very small.”
Tang becomes animated as he explains the idea at the heart of the plan.
"The next Damien Hirst is (in) a pool of 250,” he says. “You don’t just rely on your talents, but also the talents of others who contribute to the fund. (This) is core to what APT
provides and how this business model is constructed.”
Established artists are among those who have joined the program. This raises the question: Why would they do so if they do not need the financial security? In fact, they may even lose out and end up financially supporting lesser known artists.
Tang has come up with two explanations for this situation. “First is that artists admire the cause of APT. They want to support something that they see as supporting fellow artists. This is a valuable product for other artists who are not as fortunate.
"Second, (an established artist) will give others the encouragement to join and add a stamp of credibility. If the great so-and-so has joined then it must be a valid organization and others who look up to and respect this artist will join. There is a bit of peer leadership involved as well, apart from the support of a noble cause.”
APT artists qualify after being vetted regionally by two levels of curators. Associate curators identify and nominate artists while head curators approve them and accept their submitted items. A separate selling committee of mostly art experts and finance executives assesses the works.
To avoid conflict, the selling committee does not include gallery managers, art dealers or active members of museum-buying committees. Two important components govern a sale: Price and the identity of the buyer.
"To the artist, what is important is not only what the work is worth but also who owns it. We want to sell to museums and institutions so hopefully the work will be treated with respect and be seen by many people,” says Tang.
When an artwork is sold, 72 percent is distributed to the artists in the trust, with 40 percent to the individual artist and 32 percent among the artists in the trust, based on the number of works they have deposited. The proceeds in the collective pool are not aggressively invested in risky instruments because people have different attitudes to risk. There is an extended time period between when the work is sold and when benefits are paid out.
"The idea is to keep the money in a safe instrument like a time deposit and not to manage money by taking works and selling right away and then investing in stocks. The idea is to manage the trust and maximize its commercial value,” explains Tang.
"We are really incentivized to do our best to help the artist because our interests are tied to the value of the trust. It is obvious that the trust and its professionals are aware of art trends and values, but APT has no set rules when or which works will be sold for how much,” Tang says.
"By design, it is fluid and we have no rush too sell,” he concludes. However, APT is considering selling some of its collection, and a new website will be launched in September with details of the works for sale.
How the Artist Pension Trust works
Qualified contemporary artists contribute 20 works over 20 years. The schedule is: Two works every year for five years, one work a year for the next five years, and one work every two years for the remaining 10 years. The artist retains ownership of the works, while they are stored and cataloged by the trust until they are sold.
Hamilton Tang, director of APT Beijing, says this schedule achieves two things. One, it gives guidance and discipline to the artists without being overly demanding and, two, it is in the interest of everyone to pull their weight and deliver in a timely manner so that there are no freeloaders.
“The sooner everyone puts their works in, the more time is allowed to elapse to maximize their value. This will accrue to the benefit of the whole trust which will accrue to the artist. It is a very thoughtful system of checks and balances aimed at the greater good.”
Once the artwork is sold, the proceeds are divided as follows: 72 percent is distributed to the artists in the trust — with 40 percent to the individual artist and 32 percent among the artists in the trust, based on the number of works they have deposited — and 28 percent goes to APT and its partners to cover operational costs like management, logistics, insurance and archiving.
Whether individual artists sell their work or not, they will reap benefits from the collective fund. The pro rata system, which rewards artists who make regular contributions, has been arrived at through formulations by one of the co-founders, Professor Dan Galai.
“This is a system designed to be fair and incentivize artists to contribute more,” says Tang “Some artists may be more responsible than others while some may be lagging. So by definition, the responsible ones can’t be supporting those who don’t contribute.”
For example, if a work is sold for $100,000, the artist gets $40,000, the fund $32,000 which stays in cash, and the management $28,000.
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