Date
17 December 2017
Qi Baishi is often considered as one of the most influential Chinese painters, and his works provide a benchmark for the nation's art market. Photo: sina
Qi Baishi is often considered as one of the most influential Chinese painters, and his works provide a benchmark for the nation's art market. Photo: sina

Negative surprises from China’s art-related funds

Investors in a unit trust were rightly angry after they were told recently that they can only get back their initial investment amount with no return at all despite staying with the fund for four years.

The fund, issued by a Shanghai company, invests in China’s art market. But as the economy slowed and anti-corruption campaign escalated, the art market started to weaken in 2012 soon after the fund was launched.

While the fund has invested in the works of some top-tier painters, the sluggish market still presents considerable challenges for the fund manager to turn those collections into cash, let alone make a big profit as planned.

There are three main types of art-related funds in China.

The first type basically raises funds to finance art investors and collectors and seeks to get a relatively steady interest income.

Another type is what this Shanghai fund belongs to. These funds raise money and invest in different art works in the hope of reaping profit through selling them through auctions at higher prices.

There is a third type that raises money to sign emerging artists, grooming and assisting them to raise their profile, and eventually cash in by selling their works.

Investors were upset not only because of the zero return, but many of them had been promised verbally an annual return as high as 12 percent when they bought into the product, according to China Securities Daily.

However, in the prospectus, there was never any guarantee about the return.

Those who failed to check the details are now calling the bank distributors liars and are filing complaints with regulatory bodies.

Given the tepid market, more disgruntled investors may soon join them as other similar products mature.

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RC

EJ Insight writer

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