A Conversation with Skate’s CEO & Founder, Sergey Skaterschikov

Sergey Skaterschikov is the principal shareholder and an executive board member of IndexAtlas Group, LLC, an investment banking and private equity firm. He is the driving force behind Skate’s Art Market Research, which provides investment research on the world’s most valuable art and art industry companies. Skaterschikov started his first business – Skate Press – at the age of 20 in 1992 while he was still an undergraduate. In 1994, he received the “Best Young Businessman of the Year in Central Europe” award from The Wall Street Journal. In November 2009, McGraw-Hill published a completely updated version of Skate’s Art Investment Handbook, a study he had first written in 2005 for Russia’s growing number of art collectors and investors.

As a resident of Russia, what is your biggest challenge in conducting business in the U.S.?

Time. I live in Moscow and travel to New York, Boston and the West Coast frequently – usually for 2 days each trip. That enables me to spend each weekend with my family.

Drinking lots of coffee helps. I also travel with just a backpack and my laptop, which speeds things up considerably. The time difference and distances can be exhausting, but the opportunities are worth it.

What do you like about doing business in the U.S. vs. other countries?

The U.S. is the world’s most open, transparent and efficient place to do business. It’s also one of the world’s most competitive, so it forces you to stay on your toes at all times.

In most other cultures, including Europe, you invest enormous amounts of time building relationships with people in order to conduct business. Here, you can quickly pull together a team of professionals, use them for a project and then disband. It is fast, simple and the contracts are clear.

Have you ever lived here?

I lived for a period in Palo Alto, and my family spends at least a couple of weeks on vacation in the U.S. each year and we hope to have a home here in the near future when our kids move to the U.S. to study.

From the time I was a teenager, I was fascinated by the U.S. I took my degree in American studies as an undergraduate student at Moscow State University and received my MBA from Duke University. My wife and I have visited nearly every part of the country and The New Yorker is the only print media that I try to read every issue of.

You’ve talked a lot about your interest in art and the art market. What do you hope to do with this segment of your business in the long term? Surely it’s a tough sector to get into.

You’re putting it mildly by calling it “tough.” In all seriousness, though, we see big opportunities with the art market. The misallocation of talent and resources, the stubborn lack of transparency, the hugely unattractive economics for many who actually produce the art – all of this creates a whole world of possibility for innovative businesspeople.

But you’re right to emphasize the word “long-term.” This isn’t an area for quick overnight cash.

Skate’s is no different from the other portfolio companies my private equity group (IndexAtlas) invests in – we’ll build it up and exit when the time is right. The most likely scenario is that Skate’s will participate in consolidation of the art industry’s media segment, with its product and team becoming part of a larger art media powerhouse at some point. We are working on it!

What about the trends in the art market? During the big bubble from 2006 through the first half of 2008, we saw huge gains for contemporary art. Do you see a shift underway toward something different?

Yes and no. Yes, because at some of the recent auctions in the fall of 2009, we saw huge gains by the Impressionists. The Asian auctions in Hong Kong in November showed weakness for contemporary art but lots of strength for antiquities, so we might be witnessing a realignment toward more time-tested works, so to speak. Still, there is always going to be demand for fresh, quality contemporary art. People like new work. Artists who are still alive and producing high quality works still create lots of excitement, and the right ones will always be targets for investment.

Are there other trends worth noting?

Sure. New York and London are going to remain big scenes in the art market, but their relative position is declining. Auction showrooms in Hong Kong and other places will continue to host more and more prominent sales, as will art fairs around the world. The Internet will grow as a medium of exchange, which itself will bring all sorts of opportunities for collectors, investors and artists alike.

Is that what your book is about, predicting future market trends?

In a sense, yes, although it’s much more than that. Skate’s Art Investment Handbook is meant to provide a thorough overview of investment in the premium segment of the art market, in public and private companies that service the art market, and in some of the nascent art funds that have been popping up. What I do in the book and what we seek to do with our company is to give a clear explanation for valuation drivers and risks in the premium segment of the art market, talk about historical trends for certain types of investments and the opportunities out there. We use a lot of hard data and facts. We do make some predictions while at the same time avoiding making specific recommendations to acquire or avoid investments. Skate’s Art Investment Handbook is about educating investors, professionals and the general public about the history of the market, the state it’s in today, valuation methods, risk mitigation strategies and some of the opportunities we see moving forward.

On a final note, do you see much chance of the art market reforming itself and becoming more streamlined like other types of alternative asset markets?

I think the art market will always keep some of its mystery and the premium segment specifically will always be dominated by emotions and egos. However, as collecting becomes more widespread and technology allows for cost-efficient and reliable background and counterparty checks to support the art trade, I expect to see more widely agreed-upon universal procedures for how art is traded around the world and how individual collectors avoid fraud and misinformation. Finally, I think it is not a question of if but rather when we will see art being securitized in earnest. I would expect to see significant existing art collections made available to various groups of investors in a form of fund ownership units at some point in the not-to-distant future.

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