Lehman Brothers' art auction offers glimpse into the secret world of corporate collecting

Among the lots up for auction are a portrait of Madonna by Gary Hume (estimate £70,000 to £100,000), a signed etching by Lucien Freud (up to £12,000) and an old master by Samuel Walters (up to £25,000).

In all, the London auction is expected to raise £2m, with a further $15m (£9.6m) coming from similar events in New York and Philadelphia.

This is chicken feed, of course, when set against the defunct Lehmans' massive liabilities. In many ways, its value lies in the glimpse it gives us into a world which is normally shrouded in secrecy.

Banks and corporates have been discreetly buying paintings and sculptures since the 1950s and some have amassed huge collections. Deutsche Bank, for example, has 56,000 pieces in its portfolio and employs a team of curators to administer it.

The scale and shrewdness of some banks' forays into the art world was graphically displayed in February when Commerzbank sold a Giacometti sculpture called Walking Man that it had acquired in its takeover of the troubled Dresdner Bank a year earlier.

The spindly, life-sized bronze sparked a bidding frenzy which only ended when the price had spiralled to £65m, almost six times its estimate and a new world record for a piece of art sold at auction.

For Commerzbank, it was the art world equivalent of finding a crumpled tenner down the back of the sofa – or 6.5m of them.

But all too often, it is when a business goes bust that the need for transparency in the disposal of its assets sheds light on previously little-known collections.

Italy's bankrupt national carrier Alitalia raised €1.2m (£980,000) when it put up its collection of Futurist art for auction last December.

More high-profile sales followed, with the Stuyvesant auction in Amsterdam in March raising €13.6m, the Polaroid Collection going for $12.4m (£8m) three months later in New York and an Yves Klein piece owned by German bank HypoVereinsbank sold for £6.2m in June.

This rash of high-profile disposals has made boards around the world sit up and take notice of what is hanging on their walls.

In response, both Christie's and Sotheby's have set up London offices of their US-based corporate art collection teams in the past 12 months to capitalise on the banks and corporates' new-found obsession with the value of their artworks.

"In my experience 90pc of [sales] are driven by the need to self fund the collection," says Saul Ingram, senior director and head of corporate collections, Europe, at Sotheby's.

"Of course, the change in the financial climate has had an impact. I think a lot of large companies are trimming things back and diverting spending to other areas and want their art programme to be self-generating."

Ingram's opposite number at Christie's, Ben Clark, agrees that the recession has made corporates more aware of the value of their artworks, but he says: "I don't think the market has either declined or increased. Where sales have been publicised, it's generally to do with exceptional circumstances."

The tradition of corporate art buying was pioneered by David Rockefeller at Chase Manhattan in the 1960s. Apart from being the grandson of Nelson Rockefeller, he was the son of Abby Aldrich Rockefeller, founder of New York's Museum of Modern Art. In an interview a few years ago, he said the collection was "for decoration, and for employees and customers to enjoy".

Rockefeller's example was followed by the likes of JP Morgan and Bank of America and in Europe by UBS and Deutsche Bank. Indeed, Deutsche's massive collection has been described by one of its curators as "a major part of our identity as a bank".

In the UK, HSBC, Barclays and Flemings all have notable collections but it is the majority-state-owned RBS that is believed to have the most voluminous collection, numbered at 2,200 pieces.

Much of its portfolio was acquired with the takeover of NatWest in 2000, including paintings by Frank Auerbach and Howard Hodgkin.

All but 300 pieces are displayed in offices and branches. Indeed, the former chief executive Sir Fred Goodwin once boasted that he had a Hockney hanging in his inner sanctum.

The creation of corporate collections is driven by a number of different motives. Some, like Rockefeller, see them as purely cosmetic, some see them as offering a sanctifying air of cultural enlightenment, while others view them as part of their corporate social responsibility programme.

Sotheby's Ingram says: "In some cases it's purely decorative, to give the staff a nice environment to work in, but in Germany and Austria, for example, there has been a tradition of sponsoring artists from the 1950s onwards.

"Deutsche Bank has established the careers of many artists and their collection is very broad and I know that they continue to purchase."

And the phenomenon is not confined to the banking sector. Industrialists have also caught the collecting bug. In Europe, an early pioneer was the industrialist Alexander Orlow, who bought artworks to hang in the production halls of his Turmac cigarette factory in Zevenaar, Holland, which made the Peter Stuyvesant brand.

By the time the company was acquired by BAT in 2000, the collection consisted of 1,400 pieces. It was dispersed when the Zevenaar factory was closed in 2006 and a 161-lot auction of some of its finest pieces in Amsterdam raised €13.6m earlier this year.

Meanwhile, in Düsseldorf, the energy giant Eon "practically owns the city's main art museum", according to one art expert. Its headquarters are adjacent to the establishment, which the company supports to a "spectacular" degree.

And that won't change, suggests Charlotte Burns, art market editor of The Art Newspaper. "But, it is likely that more collections will come to the market over the next year. Banks that have inherited collections through mergers with other institutions, such as Bank of America, may want to refine their collection."

Perhaps surprisingly, given the appearance of art investment funds over the past decade, few businesses spend money on art as an investment vehicle. One that memorably once did was the British Rail Pension Fund (Railpen).

In 1974, the fund of the then state-owned railway system decided to devote £40m – or 3pc of its portfolio – to art buying in an attempt to protect the train-drivers' nest-egg against a backdrop of 17pc inflation.

Sotheby's, which offered its advice for free in return for the right to handle sales, had two major advantages over its smaller-time rivals: money and time.

The fact that it had what amounted to an unlimited budget meant that it could establish significant positions by buying the best examples in seven or eight categories of art.

And as it didn't plan to liquidate its portfolio for a generation – then defined as 20 years – Sotheby's and other advisers did not have to work to a deadline. By the time the resulting collection was sold in 1989, it had mushroomed to 2,400 pieces, ranging from Chinese porcelain to African tribal art.

The bulk of the $99m raised from the sale, however, came from just 25 Impressionist paintings.

The Railpen case is widely seen as a romantic venture that succeeded against the odds but an analysis by two professors at New York University's Leonard N Stern School of Business shows that the fund would have been better off putting its money into the stock market.

While British Rail's art collection produced a compound annual return of 11.3pc, it was marginally outperformed by Standard and Poor's 500 stock index during the same period.

Picture: A Deutsche Bank-owned work by Egon Schiele
Source: Telegraph.co.uk