millionaire ART DÉCOR

Fine art meets high finance

The art
of the matter
A painting artfully covering a safe set in the wall is one
way that art interacts with finance. Lisa K Erf is another.
The Director of the JPMorgan Chase Art Collection tells
Millionaire how banks perceive art as investment and the
role these institutions play in advising and acting for private
banking clients who want to create their own collections

text Shalini Seth

Dan Flavin. American, 1933 – 1996. Monument for V Tatlin.

JPMorgan Chase Art Collection

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Lisa K Erf with Sheikh Mayed bin Mohammed

bin Rashid Al Maktoum and guests at DIFC

L isa K Erf is poised at the cusp of two equally

intimidating worlds – art and finance. With an
advantage in both. The JPMorgan Chase Art
Collection, started nearly 50 years ago by David
© 2008 Stephen Flavin / Artists Rights Society (ARS), New York

Rockefeller when he was head of Chase Manhattan Bank, is

one of the oldest and most extensive corporate collections in
the world and Erf’s job, as the Director of the collection, takes
her all over the world. In the past three years, she has bought
close to 200 works of art from her travel to art fairs and galleries
worldwide, adding to the collection of 30,000 pieces.
“When we acquire, it is art of our time, young artists with
not much of a track record and emerging artists who are
getting recognition through articles and shows but are not yet
established,” she says.
In the past few years, she has been focussing outside the
United States, following Rockefeller’s idea of buying works >

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Richard Prince, American.1949

JPMorgan Chase Art Collection

for the communities where the bank has offices. “There is no

agenda to purchase artwork that will be a financial investment,
as this is a permanent collection and we do not typically sell
works. That said, our goal is to make smart acquisitions that will
hold their value, if not appreciate,” she says.
But that is only one half of her working day. She says, “I
combine my client business travel with art collecting.” An artist
herself, Erf is called in to interact with the private banking
clients of JP Morgan, which claims to advise 40 per cent of
the individuals on the 2006 Forbes list of billionaires and the
magazine’s list of the 400 wealthiest Americans.
“Our senior partners know that the amount of time I have is
discretionary, so if it is important to build a relationship with
the client they send him to me. Last week, I was in Miami
to meet a client of the bank in reference to collecting art.
About 50 per cent of my work is advising private banking
clients on art investments. But we do not advise them on
a day-to-day basis about individual pieces of art.” she says,
speaking to Millionaire at Dubai International Financial
Centre (DIFC) where master artworks from the JPMorgan
Chase Art Collection are being exhibited.
“Art is not like television.
You cannot be passive. It
has to engage you and it
has to speak to your soul”
INTIMIDATING
Erf is entirely at home amidst museum-quality modern and
contemporary works by Jean-Michel Basquiat, Zaha Hadid, Roy
Lichtenstein and Andy Warhol (who, incidentally, said, “Being
good in business is the most fascinating kind of art”). Even if
some of the bank’s clients are not. “The world of art can be very
intimidating, perhaps purposely so. So if you walk in speaking
exactly the same language and understand the workings of it…
it does make a difference,” she explains. Seen through her eyes,
these high net worth individuals learn that a red dot means
that an artwork has been sold, that they should expect to pay

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almost as much for the frame as they do

for a painting and other peculiar ways of
the art world. “You need to know that
the gallery should make the price list
available to you,” she says.
Many of the bank’s clients are first-
time buyers of art. Some of them have
always wanted to collect art but did not
know where to start. Others might want
to take up art as they buy newer, pricier
cars or bigger, glossier diamonds. And JP
Morgan is not the only bank which has
incorporated art in its circle of advisers.
Almost echoing Erf’s sentiments are
the words on Citigroup’s art advisory
service website: “The art world is
a singular culture: unpredictable,
sometimes impenetrable, often
inexplicable. It is a world where both
what and who you know matters. In
collecting, ultimate success may be
linked to ultimate access.”
In operation since 1979, Citigroup’s
art experts educate neophytes or bid at
auction for clients wishing to remain
anonymous, for an annual retainer. The
bank’s advisers also help authenticate,
insure, and value pieces. If a client
needs cash, they can arrange for a sale
or a loan against the artwork.
ABN Amro’s private banking arm,
Neuflize, specialises in providing advice
on art, including paintings, sculptures,
furniture, jewellery, books, etc. It also
assists with physical management of
Cindy Sherman. American, 1954
collections, their valuation and the sale JPMorgan Chase Art Collection
of artwork. Its bespoke services include
restoration, photography, transport and
loans of artwork for exhibitions.
ING Private Banking clients receive advice on art from donated to museums, your bankers will tell you that collectors
the experts at ING Art Management. Its services include a who want to leave artwork to their children must contemplate
collecting policy, sales, purchases, and insurance, restoration having insurance in place to cover estate taxes, which can run
and conservation, tax and legal issues, appraisals and succession as high as 48 per cent in some countries.
planning and auctions and catalogues. As the director of the JP Morgan collection, Erf’s work,
typically, is not about getting anyone to sign any dotted lines.
“I might tell them how to deal with prices, with art galleries
ESTATE TAXES and the market value of the artist… My advice to clients is
Collecting art is not just a rich man’s sport; it also poses a unique to see a lot of art. Go see as much as you can. If you want to
set of management issues. For example, what happens to the buy a particular artist try to see as many pieces of his work as
collection when the collector dies? While some collections are possible,” she says. >

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“We never advise

clients to
buy art only
for financial
reasons. It is
a cultural
investment”

was the first. So there has been a lot

of interest in that. But that is a rare
occurrence,” says Erf.

Gilbert and George
British, 1942 and 1943
JPMorgan Chase Art Collection
And while a bank may advise on, mortgage or insure the
work of art for you, experts straddle the two worlds with great
efficiency. “We never advise clients to buy art only for financial
reasons. It is a cultural investment. Art is not like television.
You cannot be passive. It has to engage you and it has to speak
to your soul. It is a long-term experience,” says Erf. Advisers
say that the best art investments are driven by three things: an
individual’s passion, timing of purchases, and the quality of the
works bought. Erf and her ilk put love and money in the same
sentence when they tell you that when you buy what you know
and love, it is likely to appreciate.
And it does, becoming a valuable investment as well as a joy.
“Last year, we bought an artwork at Art Basel Miami Beach fair.
The work has appreciated three times since then. I know because
it was part of an editioned series and the piece that we acquired
Provenance
Not rare enough for the financial
world to stay away from it. For
a bank, even a private bank, art
advice does not come in the same
category as choosing which school
a client’s child goes to. Usually, a
collector has a lifetime interest and
collections are typically in the $1
million to $200 million range.
In a non-transparent market,
advisers research everything from
the artist, the authenticity of
the work, its condition, quality,
provenance and pricing. A finance-
backed purchase would mean
a dossier on current markets – auctions, dealer and private
markets. The vendor as well as the export and legal history
would have been vetted.
An adviser will also tell you when not to buy. Like now, for
instance. When everyone is buying, creating an overheated
art market where the rate of price increase is not justified by
authenticity, quality, rarity and condition. “There is a lot of
temptation to buy  because contemporary art has become so
popular, but one would advise not to go so fast,” says Erf. She
recently advised a client from the region who was interested in
building a serious collection, “to first see a lot of art, wherever
you can, to help focus his interest.” In fuelling his passion for art
fairs, whether at DIFC or at Arco, Erf would have helped create
a collector rather than sell a painting.

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After the indiscriminate buying of the Eighties, experts say Just as you would be reassured by a favourite chair or candy in
that the art market took off in 2000 with the deterioration of a meeting room, the choice of paintings greeting you each time
the equity market. Like any other investment, art comes with you enter can become the start of your collection. This region,
its own index, or two – the Artprice Global Index and the with 46 billionaires who are finally agreeing to have their wealth
Mei/Moses Fine Art Index. According to Artprice, prices rose counted and managed, is the target of a host of private banks.
24.4 per cent between January and December 2004. In 2006, With the India and China art markets showing the path to
Artprice’s global price index was up a further 25.4 per cent, to growth, the Middle East is not far behind. Auction houses such
just 5 per cent below its peak level in 1990, with markets such as as Christie’s, Sotheby’s and Bonhams, and museums such as the
the United States being 32 per cent higher than the speculative Guggenheim and the Louvre are all hoping to ride this wave.
bubble peak in 1990.
The Mei/Moses Fine Art Index, on the other hand,
compares art sales performance with the S&P 500’s total Andy Warhol. American, 1928 – 1987
JPMorgan Chase Art Collection
return. According to the 2004 update, art outperformed
the S&P from 2000 to 2003.
According to Artprice, in 2006 no less than 810
works sold for over a million dollars, generating total
auction revenue of $2.7 billion. In 2005, 487 fine
art sales generated figures above a million and total
auction revenue of $1.4 billion. Until the end of the

™2008 Marilyn Monroe, LLC by CMG Worldwide Inc., Indianapolis, Indiana, 46256 USA
Nineties, only 100 to 200 auctions per year broke
through the million-dollar threshold.
Most art advisers do not like auctions. For one, they

©2008 Andy Warhol Foundation for the Visual Arts / ARS, New York
can artificially escalate the market value of an artist.
Two, they do nothing for the world of art. “I do not
usually buy from auctions because I believe that they do
not support the world of art. But we do buy occasionally
from auctions,” says Erf.

INSTITUTIONAL
Corporate collections certainly do. Even though the

www.MarilynMonroe.com
banks with such collections – such as JP Morgan
Chase, UBS or Deutsche Bank, which has a collection
comprising of some 50,000 pieces with an emphasis
on paper – have other uses for them. While sustaining
the world of contemporary art, it also becomes a form
of indirect marketing. “Artists want to be in our
collection because it gives them a chance to be seen
in the context of others in the collection. A corporate
collection becomes institutional rather than about
one person,” says Erf.
© 2008 Artists Rights Society (ARS), New York / SIAE, Rome

And then, for the sake of art, auctions do serve a

purpose. Erf says: “Auctions are important because
very often the world of art is closed to those except
the ones have an intimate relationship with the
gallery owners. If you want to buy an artist like
Damein Herst there are many others in the queue
before you. In an auction, everyone can have
access to that piece of art. In that sense it creates
a level playing field.”

Alighiero e Boetti. Italian, 1940 – 1994

JPMorgan Chase Art Collection
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