Shinnecock Partners
March 29, 2018
Shinnecock Partners is an investment boutique with a 30-year track record of successfully identifying talented money managers for our portfolios. Shinnecock's investment objective is to produce a consistent rate of return and minimize portfolio volatility through rigorous risk controls and diversification across asset classes, strategies, timeframes and markets traded. Our investment philosophy has remained unchanged since inception and has produced superior performance across many different market cycles.

Mice Go Where Elephants Cannot: Art-Secured Lending

Mega-sized pensions and other “huge” investment pools require ginormous markets.  Back in the day, when I was at a large securities firm, we only sought out opportunities that could accept billion-dollar investments.  Most investors, without such voracious and jumbo-sized appetites, can do better in niche markets such as art-secured lending.  This market is approximately $15 - $20 billion and growing nicely at 13%, as reported by Deloitte and Touche, big enough to be interesting, yet small enough to be attractive.

 

Similar to traditional asset-based lending, art-secured lending is simply a loan backed by fine art instead of more traditional forms of collateral (e.g., real estate, equipment, inventory, receivables, etc.).  The appeal for an investor is substantial:

  1. Uncommon yields of 8% - 12%
  2. Short duration between 12 to 24 months
  3. Capital protection from modest loan-to-value ratios of 40% - 60%
  4. Collateral security safeguarded by taking possession in a bonded warehouse
  5. No direct correlation to equities or other fixed income investments

 

Attached is our research piece as a “How-To Guide”:

  1. An overview of the market and the “buzzword” lexicon
  2. Key factors to consider
  3. Risk mitigants
  4. An investor participation road map

 

For the DIY investor, there is plenty to digest.  For others finding the information compelling but wanting a pathfinder, we are available to help.  As usual, we welcome any and all comments, too.

 

http://www.shinnecock.com/articles/alt_lending/art_finance.pdf 

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