Portrait of the artist– this time with a pension

Read the full article http://www.guardian.co.uk/money/2009/sep/19/artists-pensions#

When entrepreneur Moti Shniberg asked one of his artist friends how he expected to send his child to college, the artist responded by asking him to buy some of his work. "That's when he realised that artists don't do financial planning," says Pamela Auchincloss, chief executive of the Artist Pension Trust (APT).

Shniberg's exchange with his friend marked the birth of the APT, an investment scheme that provides artists – many of whom struggle to make a living, let alone plan for retirement – with some financial security in old age.

When the scheme was first set up five years ago in New York, its prospects were dim. Could the concept – a mutual fund in which artists invest in their own future – take off? Yet it has, and the APT now operates eight trusts in 60 countries. Some 1,100 artists have deposited 4,500 pieces, with a total value of about $50m (£30m).

From the outset it had some of the big guns of the art world supporting it. Former San Francisco Museum of Modern Art and Whitney Museum director David Ross provided the art expertise, while Shniberg and economist Dan Galai ensured it had a firm financial footing.

To participate in the scheme, artists invest 20 works over a 15- to 20-year period. The artist remains the owner of his or her works, which are held in the trust's possession until they are sold. Once the artworks are sold, each artist receives regular annual payments: 40% of the net proceeds from the sale goes to the artist; 32% goes into a pot from which the artists receive a pro-rata share linked to their investment; and 28% is retained by the APT to cover its costs and distribute among its 120 financial backers (who have provided $10m in funding so far). The 28% equates to a 0.6% annual management fee over the 50-year life of the fund.

Aimed at emerging to mid-career artists, the APT has some high-profile artists on its books such as Jane and Louise Wilson, Mike Nelson, Goshka Macuga and Richard Wright, who have all been short-listed for the Turner prize.

Each trust must recruit 250 artists before it can sell any art but membership is not open to everyone, with participants hand-selected by the APT's art specialists.

Galai, an economist specialising in risk, worked out the basic return structure based on the Mei Moses Fine Art Index. Assuming an annual 15% increase in the art's value and an initial average value of $5,000 to $10,000 per piece, he estimates that payouts to artists could total $500,000 to $1.5m each.

The venture has reached a crucial stage: the New York trust is the first to close to new members and will start selling art next year. It's about time – Auchincloss admits she gets phone calls from artists asking when they are going to get their first cheques.

The trust does not worry about artists leaving when they become famous. Ross once said if that happens, APT would throw a party, because it would have accumulated several works whose value had suddenly jumped. Once invested, art cannot be retrieved.

The London trust has signed up 175 artists and is expected, along with Berlin and Los Angeles, to close by the end of 2010. The APT is already planning the next generation of trusts, with four covering Europe, the Americas and east and west Asia. For these the investment period is to be shortened to 10-15 years.

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