UBS: Still Entrenched in the Art World

Count me in with Anthony Haden-Guest: for all their credit-related losses, the big private banks and wealth managers like UBS and Lehman Brothers are not going to ease up on their sponsorship of art-world events.

Guest quotes a couple of art-world insiders as saying that UBS's sponsorship of Art Basel is in jeopardy and that it might even start selling off chunks of its art collection. But the former seems wildly implausible to me, while the latter simply wouldn't move the needle, as they say, in the context of more than $40 billion of losses.

The private-banking and wealth management units of these banks are steadily profitable, even in times of turmoil. Right now, with investment-banking revenues and profits plunging, they're the one part of the business which is still making good money and providing stability to the greater whole. And if you're in those businesses, the only important thing is that you spend as much time getting in front of rich people as you possibly can. To that end, sponsorship of Art Basel is an unparalleled opportunity for UBS, and one which they would be foolish to give up -- especially given the Swiss connection. UBS still has some pride, and it's pretty unthinkable that they would let US Trust, say, take over a major sponsorship in their own back yard.

The stated reason why UBS might pull back is that the "targeted audience in Basel and Basel Miami has seemed to be American" -- and UBS has announced that it will no longer provide offshore private-banking services for US clients. But it will still provide onshore private-banking services, and in any case both Basel and Basel Miami are increasingly international, with the whole world going to the Swiss fair and many very high-value Latin American clients going to the one in Miami.

The Fine Art Fund's Philip Hoffman is also sniffing around UBS's art collection:

Hoffman is betting that some art will go too. "People like UBS who are having terrible hits really probably shouldn't have $500 million tied up in art," he says. "They have some Freuds, and they've got some major pictures in their collection."

Sorry, but if you're in the market for distressed assets being sold at fire-sale prices by investment banks, you're much better off buying CDOs than dropping hints that there's a few paintings you might be interested in. Selling art isn't frowned upon in the art world quite as much as it used to be, but the downside for UBS would still be much greater than any upside, unless they sold to a major museum. Which I don't think is what Hoffman had in mind.