LINK. management

1. NEWSLETTER 27 February 2014 LINK. management ART NEWS INTERVIEW WITH SOTHEBY’S HEAD OF IMPRESSIONISM AND MODERN ART DEPARTMENT (PARIS) AURELIE VANDEVOORDE LM: Total Turnover in the contemporary art segment has increased quite significantly in the past few years. Artprice estimates that total turnover in contemporary art increased by 15% from June 2012 to June 2013 whereas turnover in the modern segment decreased by 9% over the same period. In that context how do you perceive the current state of the impressionist and modern art market? AV: I find it difficult to compare the Impressionist & Modern Art market with the Contemporary Art market: they are two markets governed by different rules, with actors who behave in different ways. The Contemporary Art market is, by definition, a market that is constantly evolving, that sees new artists appearing at auction every year. If we leave aside the great masters of Post-War Art, who have become blue-chip investments, in the market for strictly Contemporary Art there is an element of “betting on the future”, of speculation. This explains why the value of certain living artists can rise in spectacular fashion in the space of only a few years. The Impressionist & Modern Art market is very different: it is today a market of certain, stable values, that is no way speculative. The value of great Impressionist and Modern Masters has now been firmly established and progresses in a manner that is less spectacular but more sure. However any talk of a slowing down in the Impressionist & Modern Art market needs to be put in perspective. Each sale in this domain has seen the establishment of new record prices and if we take the last Impressionist & Modern Art sale at Sotheby’s London in February 2014, which attained £ 216 million, this was the biggest ever sale at Sotheby’s London in any speciality. This proves how extremely solid and dynamic this market remains.

2. LM: Do you consider that collectors of impressionist and modern art and those collecting contemporary art have different profiles? And do you see a new type of collectors in your segment (originating from BRICS countries) or are they pretty much the same traditional ones? AV: The active buyers in these two markets have evolved a lot in recent years. Impressionist & Modern Art sales no doubt present a less diverse buyer profile since the great traditional buyers (the majority originating from the United States and Europe) continue to play a fundamental role in our sales. At the same time, each sale sees the appearance of new buyers. For several years now buyers from Russia, Asia and the Middle East have become essential players in the Impressionist & Modern Art market. More recently, buyers from Latin America have made a dynamic contribution to our sales. This was notably the case for the sale last November in New York. If we look at the last evening sale in London in February, we had bidders from 44 different countries, unprecedented for this speciality! This proves that this domain attracts more buyers every year. LM: Given the fact that there’s a limited number of high-quality artworks available in the impressionist and modern segment, how can this segment reap further growth going forward? AV: It is true that chefs d’oeuvres by the great masters of Impressionist & Modern Art are increasingly rare, as more and more of these works can be found in museums. This phenomenon is however counterbalanced by two elements. Firstly, we keep rediscovering works, and even entire collections of Impressionist & Modern Art, which proves that many works still remain in private collections. In New York last November, we sold the superb Zieseniss collection, including masterpieces (by Pissarro, Sisley, Courbet …) that had not been seen in public for almost a century. Furthermore, this phenomenon of a supposed shortage of masterpieces leads to an explosion in prices whenever an exceptional work is presented at auction. The most recent example is the record price achieved by the magnificent painting by Pissarro, Le Boulevard Montmartre, matinée de printemps(1897), which sold for £ 19.7 million ($ 32 million) in our sale in February 2014 in London. This painting, of museum quality, one of the last Parisian street scenes by Pissarro still available on the market, achieved a price almost five times higher than the previous world record for the artist. LM: Following up on the previous question, are you inclined to think that the future growth will be attained through the rediscovery of certain movements or artists in the impressionist and modern art segment? Have you witnessed such an evolution recently and are there specific movements or artists that have been attracting increased interest over the past couple of years? AV: I think that the growth of the Impressionist & Modern Art market will be above all supported by an increase in the price of masterpieces. Along with this, certain markets are becoming newly important. For several years, the Surrealist Art market

3. has brought many surprises. The prices attained for artists such as Salvador Dali, Max Ernst and many others is in constant evolution and they still have wide scope for progression. Even for the biggest, well established masters, the market rediscovers certain aspects of their oeuvre that have thus far been almost neglected: for instance, for several years, sculptures and ceramics by Picasso have been achieving unprecedented prices. It is possible that sculptures by artists such as Miro will in the future have the same success. LM: How do you perceive the presence of a freeport in Luxembourg? AV: We are keeping a close eye on this project that is at the heart of Europe and are in touch with its promoters. It is still a bit too early to say anything more. ART MARKET HOW « ART FLIPPING » IS GETTING OUT OF HAND « Art flipping » has become a powerful trend among some collectors lately. The latest auctions have demonstrated how buyers can presently be split into two main groups: long-term investors, who remain faithful to the traditional notions of collecting, and short-term speculators, known as « flippers », who focus on the red-hot market for emerging artists, and sometimes even on more established names. These latter collectors chase usually works by up-and-coming artists with the intention of reselling them quickly (usually a sign of bubble when it reaches the current magnitude). From 2011 through 2013, the number of works, sold at auction after a holding period of less than three years, topped 7,300 annually, compared with 4,023 in 2007, when the art market was peaking (Artnet). But “flippers” also target increasingly other art segments like Post-War art. As an example, the Mexican financier David Martinez was identified by dealers as the seller of the Francis Bacon « Portrait of George Dyer talking », which fetched $70 million three weeks ago at Christie’s London, having allegedly acquired the work for $12 million in a private transaction six years ago. The Taiwanese entrepreneur Pierre Chen submitted Gerhard Richter’s 1994 abstract work “Wand” to Sotheby’s auction this month after an even shorter holding period. The canvas had been acquired privately by Mr Chen for an undisclosed price within the past three years and sold to a telephone bidder for £17.4 million. Mr Chen and Mr Martinez are among a new breed of collectors, who buy high privately and then sell even higher at auction. With consignors of valuable works exempted from

4. paying any seller’s commission, and guarantees available to remove any risk of failure, wealthy speculators can play the art market with confidence, increasing the likelihood of making a profit. Reselling well-known pieces by postwar icons such as Francis Bacon and Andy Warhol can yield significant returns. But on a percentage basis, artists born in the 1980s can prove even more lucrative, provided collectors choose wisely. This trend of flipping works by successful young artists is not new and galleries have always tried to counter such behaviour. But short-term profit taking has gained traction in recent years, particularly since the JakobKassay phenomenon in New York. Two years ago silver paintings from Kassay breached the 100,000 USD threshold at auctions only a couple of months after being sold in galleries for a tenth of the price. Similarly pieces by 28 year-old Oscar Murillo and 25 year-old Lucien Smith have surged more than 3,000 percent in the past two years. The profits achieved by sellers reflect a combination of low entry prices and increased demand for the hottest names, mostly men under 35. Some advisors have even tried to specialize on such names, building a significant stock of over 30 works before launching intense promotion campaigns, and reselling them at auctions.

5. It is very tempting for any collector to follow this type of trends and take advantage of the speculative frenzy around some of the shooting stars of the art world, but most of these young artists are often unable to sustain the momentum after a few years. JakobKassay’s recent price performances in auction have already shown a softening of the demand, as shown in the following graph. Source Artnet Indeed such an accelerated commercial recognition (but not necessarily institutional) is very disruptive for young artists, as they are sucked into a ruthless financial world (last year 24 Oscar Murillo works generated a combined $ 4.8 million). As one famous art insider puts it: « The road is littered with artists who’ve been chewed up and spit out ». Simultaneously headlines about young artists achieving more than 3,000% return on ‘investment’ are attracting an ever-growing number of new collectors and buyers from around the world, sustaining global demand for contemporary art, at least for now. If you no longer wish to receive our newsletter, please send an email to Office@ linkmanagement.lu to be removed from our list Visit our Website:WWW.LINKMANGEMENT.LU/ Phone: +352.26.11.95.05 LINK Management is not responsible for anyerrors or ommissonswithinthis e-mail. All materialwithinispublishedwithoutresponsibility.