A private senior debt asset-backed securities (ABS) note backed by art loans is launching in Switzerland, aiming to tap into the lucrative and growing art market.
It offers investors access to a stable fixed-income opportunity, backed by a diversified portfolio of blue-chip fine art.
The seven-year note has an interest rate of 2.5 per cent +SARON, which is paid semi-annually.
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The Swiss-franc denominated offering will be managed by ArtSecure Lending, which is being set up as a special purpose vehicle.
The issuer, ArtSecure Capital, will have external art experts on its board of directors, as well as credit specialists.
Zurich-based asset management services firm Finanz Konzept helped to set up the note and is acting as a placement agent to attract investors.
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Xeno Marugg, head of corporate finance at Finanz Konzept, told Alternative Credit Investor that they are targeting CHF 100m (£91.8m) initially, ahead of a total facility of CHF 250m.
“We are looking for Swiss pension funds, family offices, insurers and private banks,” he said.
“Additionally, some ABS funds globally are looking at more exotic areas and different currencies, for hedging purposes.”
There were $65bn (£48.4bn) of global art sales in 2023 and the global value of art and collectables is estimated to be $1.7tn, according to Finanz Konzept data.
Art collateral moves independently from traditional asset classes, reducing overall portfolio risk, Finanz Konzept research said. Since art values are less affected by economic cycles, the bond’s underlying collateral remains stable during market downturns.
Marugg said that “art-backed credit is coming up” and highlighted that it is a space that is getting more traction.
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The note will solely be open to blue chip art, typically exceeding $500,000 per piece with 50 per cent loan-to-value, that has been appraised externally to ensure a correct valuation.
Marugg said that the blue chip art market is “very stable” and there is a larger market of potential buyers than there would be for lower-quality art.
“With semi-annual interest payments and an interest reserve account, we would have a year to sell the art before the money is needed,” he added. “There are auctions every quarter in the big [auction] houses.”
Finanz Konzept is targeting a minimum loan amount of $5m from collections globally and has already spoken to potential borrowers who are keen to participate.
