Financing Art

Anthony Haden Guest on the art bridge finance group

It was two years ago that Kristina McLean, a Canadian-born financial analyst in her early 20s, left Morgan Stanley in order to enter the art world. This was when bankers were surfing a wave that seemed as if it was going to crest forever and McLean's peers thought she was crazy. "It's not looking so crazy now at all," she says. "And I'm happy that I did it when I did it."

It happened that McLean was still at Morgan Stanley when we first met. She had contacted me to suggest I take a look at a high-profile art fund, Fernwood Art Investments. Fernwood, which was the creation of a certain Bruce Taub, which had some savvy pros on board, and had been the subject of a 2004 Harvard Business School study, 'Fernwood Art Investments: Leading in an Imperfect Marketplace'.

McLean had visited Taub in his Manhattan office. The picture he painted was rosy, rosy, rosy. But by the time she and I spoke Taub had run through the money and the fund was a smoking crater above which legal clouds were gathering.

McLean then moved to London. And, considering her close scrutiny of Fernwood, it is interesting that McLean is now herself sallying off into the Imperfect Marketplace by launching an art fund of her own. It's called the Art Bridge Finance Group, and is funded by a group of private investors. Saturday October 18 was the day of its public outing at Frieze. McLean hired a Routemaster double decker bus to take a mix of collectors, curators and press on a tour of young and emerging galleries, during which time - for any travellers who felt hopelessly art-starved during Frieze Week - Performance art took place on both decks.

Actually this tour might stand as a live demo of the contrarian nature of McLean's fledgling fund. Her research has indicated that there are some fifty funds worldwide, all of which buy and sell artworks and a few of which short Sotheby's - Christie's not being publicly held - or what they perceive as art-related stocks as a kind of hedge.

McLean's thinking is quite different. The Art Bridge Finance Group won't be cutting out dealers by buying art and squirreling it away. The fund will be investing in cutting-edge mostly young galleries. "What I am doing is I'm giving them a bridge loan," she told me some months ago. "The loan is to enable the gallery to buy art from their artists and to fund their projects. It used to be that you would find an underknown artist, usually young, buy in and wait for them to rocket to the skies. You can't wait. You have to actively do something. That's what I think. A good way of doing that is aligning yourself with the right gallery."

What McLean is trying here is more radical than it may at first sound. It's a counter-attack against the blue chip, often multi-national mega-gallerists that have been vastly increasing their power in the art world and which tend to use the smaller galleries as so many fish farms, pools from which they can snatch attractive prospects at their leisure.

"The smaller galleries are pushing the artist into that first group show ... maybe a first solo show ... maybe a tiny museum show somewhere. And then suddenly they get poached by these bigger galleries," McLean says. "So instead of helping galleries where I could just give them cash, if I help the younger galleries I can add a lot more value than just money. In the early stage it's developing goodwill with the gallery. And working on smaller projects in order to establish relationships. Which might only become fruitful for me, investment-wise, in a couple of years. I'm going to leave the expertise in the hands of people who really know what they are doing. And the people who are adding value. And that, ultimately, is the gallery. And I think that, coming from a finance perspective, where everything is about adding value, and activist investing, and things like that, I think that I can add most value to younger emerging galleries."

This value will include access to the collectors and institutions that McLean has cultivated. And she plans to target them precisely. "I'll do extensive research to develop a sense of who the client base is. Are they willing to pay what the work will end up costing? And all these things. And then I will do special arrangements with them. I can transfer the money directly to the artist. Through the gallery."

This is not, of course, a cultural equivalent of pro bono. If the Art Bridge Finance Group puts up the capital for an entire project, they will expect half the profits, if any. Otherwise, she will work things out on a case by case basis.

And - as with any art funds - everything will depend on the eye of Kristina McLean and whomsoever else is working with her. "I try to pick from each gallery artists who I think are liquid." Which is to say artists that she thinks are likely to sell. Which is also to say the most poachable. Which is, of course, where the fund comes in. "The gallery that can write a cheque in the studio is the gallery who ultimately ends up winning. So I guess I have to pick the galleries who I think deserve that," she says.

This conversation, I should say, was before the tsunami took down the banking system, so as Frieze week opened I called McLean to ask whether she had come through all this turbulence unscathed?

"Yeah, totally! Absolutely!" she said buoyantly. "Now that so many traditional backers are becoming scared of backing galleries I think maybe I have even more opportunities."

And if things do flatten?

"A rising tide lifts all ships," she says. "But as soon as the market kind of corrects itself the galleries that really do have talent will be the ones that remain. And the galleries that don't will fall by the wayside."

Anthony Haden-Guest