MacDougall's: Getting rich selling Russian art

At first, the MacDougalls had tried to fill a niche in which the large auction houses did not operate. Source: kommersant

At first, the MacDougalls had tried to fill a niche in which the large auction houses did not operate. Source: kommersant

William MacDougall, graduate from Oxford, was an antique collector. After visiting Russia in 1984 he started collecting paintings by Russian artists. Now he has more than 100 works and triumph over Sotheby's and Christie's auctions.

In Paris, after the 1917 Russian Revolution, people would joke that it was hard to find a taxi driver with a title lower than prince. Now, in the wake of the 2008 crisis, the joke is that it is hard to find a single painting in a Wall Street office that was not sold to pay off debts.

The historical record is being set straight: Post-Revolution Russian émigrés may have sold their paintings for next to nothing, but, since the crisis, Russians are buying these paintings from Americans, according to William MacDougall, who is doing quite well for himself in this sphere.

MacDougall, who is one-quarter Russian and three-quarters Scottish, traveled to Russia in 1984 to connect with relatives. He came into contact with a young woman named Ekaterina, whose grandfather had been friendly with MacDougall’s grandfather in exile, while they were in Harbin after the Russian Revolution. MacDougall met, married and took Ekaterina to London. There, Ekaterina studied economics and worked as a banking analyst.

Meanwhile, MacDougall, who had graduated from Oxford with an economics degree, was heading the company TRW Investment Management, managing the Lucas Pension Fund—one of the largest pension funds in Great Britain, with assets of $6.1 billion. Bonuses allowed MacDougall to start collecting antiques. As the Scotsman happened to be drawn to Russia, he also started collecting paintings by Russian artists. He bought his first—a canvas by Sergey Sudeikin—in 1990, in London. In 2004, MacDougall already had more than 100 paintings by Russian artists of the early 20th century.

Once, while the MacDougalls were out to dinner with friends, everyone began complaining about the exorbitant prices of large auction houses such as Sotheby’s and Christie’s. “If everyone dislikes them so much, why doesn’t anyone want to try opening their own auction house?” MacDougall asked suddenly. The couple, weary of the city’s stuffiness, had long been thinking about taking up an activity that would feed their souls. The idea of an auction house seemed practical.

For the first auction, they chose the most audacious time and place possible—November 30, 2004, in London’s St. James’s Place. Russian auctions were scheduled to take place that day on the neighboring King Street, in the famous Christie’s auction house and, the next day, at Sotheby’s. The MacDougall’s auction, which included 106 paintings, failed unequivocally: It took in $153,650 from sales of paintings, and the losses were twice as great.

At first, the MacDougalls had tried to fill a niche in which the large auction houses did not operate: selling works by Russian émigrés of the so-called School of Paris. However, it became clear that, to be profitable, they would need to branch out. So the MacDougalls again entered into competition with the grandes dames, working with Russian art of the late 19th and early 20th centuries.

The MacDougalls divided the labor. Ekaterina builds the collection and networks with customers, while William oversees the business processes—accounting, lawyers, insurance.

By 2010, the MacDougalls had managed to triumph over both Sotheby’s and Christie’s. That year, half the earnings of all the participants in London’s Russian Art Week went to MacDougall’s. At that point, “The Little Cowboy,” a work by Ilya Repin’s student Nikolai Fechin, sold for more than $9.2 million—seventeen times higher than its initial appraisal. MacDougall’s collected 12 percent of the price.

In 2011, right after the crisis, the MacDougalls opened a branch office in Russia. Business was brisk. The Mei Moses All Art Index, which tracks sales of paintings at auctions in New York and London, rose by 11 percent in 2011. By contrast, the Moscow Interbank Currency Exchange index fell by nearly 17 percent during that period. Investors have happily put money into paintings, but not into securities. The auction house’s earnings are currently at $38.2 million.

Why was it necessary to launch a business in Russia? In the auction field, the victor is the one who is the first to provide customers with information on rare paintings. This is precisely why the MacDougalls even print their catalogs in Russia: They say that glossy magazines, many of which are printed in Finland and Poland, have the time to reach readers; but catalogs must land in customers’ mailboxes the day after they are printed.

The printing house must be closely supervised, though, like all Russian contractors. MacDougall recalls how, as far back as six years ago, he tried to open a branch office in Russia with partners from Artemis Financial. At the last minute, the company backed out of the deal and left its prospective partners owing money that it refused to repay.

MacDougall still had the electronic correspondence, and he took it to his attorneys. Of course, they laughed at him. For a legal investigation, the correspondence was insufficient—a detailed agreement would be required. “In London, in cases like this, never mind correspondence—words are enough,” MacDougall said indignantly.

Artemis Finance was not available to comment on the situation as, according to CS, it has left the market.

Not coincidentally, in a CS interview, MacDougall named the accused contractor. The Scotsman is playing hardball with the contractors—otherwise the historical record cannot be set straight.

Investments in Russian antique art make 30 percent annually. Throughout the whole crisis, the Mei Moses All Art Index, which reflects prices at the New York and London auctions, confidently surpassed stock exchange indices.

First published in Russian in Kommersant.

All rights reserved by Rossiyskaya Gazeta.

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