written by Eddie Arroyo
UBS is the largest bank in Switzerland and considered the world’s largest manager of private wealth assets, estimations are of CHF 2.2 trillion in invested assets. It has established present in all major financial centers worldwide, with about 37% employees in Americas, 37% in Switzerland, 16% in the rest of Europe, and 10% in the Asia Pacific region. UBS has major capital in the United States with its American headquarters located in New York City. Offering wealth management and global asset management it offers high net worth individual in investment products, alternative investments, and quantitative investments.
Melanie Gerlis from The Art Newspaper noted that at the end of 2011, one joked UBS’s art collection had made more than it’s banking business that year. Exact figures were never verified because there is no requirement to do so. Hence, the argument of the art market for being thee model for a free market. Real estate, medical, and the manufacturing market cannot make such a boast. The art market functions on the very principal of a free market economy unconstrained by government policy which intervenes in the setting of prices. Private wealth tends to be secure and high net worth with more than $50m of investible assets for bank. Gerlis cited UBS’s strategic agenda stating, “In the first quarter of 2012, pre-tax profit in this area was up 70% on the previous quarter to SFr803m ($883m). The bank closed the period with invested assets of SFr772bn ($850bn), up 3% on the fourth quarter of 2011.”
It’s beneficial for UBS to be a major sponsor of Art Basel and Art Basel Miami Beach. So much so that its logo is showcased along every press release associated with the fair. An art fair is a vehicle to move outside the institutional framework of Museums and auctions houses – a contemporary salon style presence. Where galleries are given a limited platform to utilize their commodities and produce high returns on substantial investment. The previous economic collapse has illustrated the pitfalls of the free market in high risk high returns nature. Despite this recent history the art market continues to thrive. This year it is estimated that there will be 18 major satellite fair’s in Miami. A number which has continued to grow since Art Basel Miami opened its doors in 2001.
Art Fairs have had a difficult time during the recession but compared to other markets it has done fairly well.
Banks conduct services in art commodities which vary since every transaction is different but generally lend up to around 50% of a work’s value and rates vary between 2% and 5% above interbank lending rate. However, UBS has never offered art lending. Consultation is the extent of service offered in such a field. Abigail R. Esman wrote an article on Forbes stating, “The number of contemporary works of art sold has more than tripled over the decade.” This follows the general equilibrium theory of free market principal that the law of supply and demand predominates in an ideal free and competitive market, collectively known as Perfect Competition. Where there are the low barriers to entry that exists with the lack of a coercive presence which foster a free market.
With the global recession subsiding there is a genuine curiosity as to how the art market will flourish and how UBS’s role is going to evolve. But Gerlis did reference a possible ten to 20 year future when noting that, “the banks’ art advisory teams will be thriving.”