Play as Webslides

Yoav Dror's List: Art Investment Funds

Dean Art Investments joins hedge fund platform Harbour Capital

www.hedgeweek.com/...detail.jsp - Preview

on 2009-03-11
Charles Saatchi to advise fine art hedge fund on investments

www.livemint.com/...es-Saatchi-to-advise-fine.html - Preview

on 2009-03-11
Art Investment Funds: Current Art Funds

www.caslon.com.au/artfundsnote3.htm - Preview

on 2009-02-24
- 15
  to 20% along with opportunities for portfolio diversification
- Société Générale
  Asset Management (SGAM), which promoted a Luxembourg-based
- 15 more annotations...
- - ArtVest, launched in 2004 by art dealer Daniella Luxembourg,
    established offices in New York
  - Fine Art Fund (FAF), based in London
  - The China Fund, headed by former Sotheby's executive Julian
    Thompson, specialises in oriental art
  - The Art Collectors Fund, based in Switzerland,
  - Russian fund Aurora
  - The Art
    Trading Fund, p
  - increase margins by cutting out
    the middlemen and -
  - assembled
    a stable of living artists, whose work it will sell to a
    network of buyers. Since each artist produces a steady stream
    of work, they can be viewed as income-producing assets,
    with a proven earning base of around £2.5m a year.
    In addition [it] says the fund will also buy art from sellers
    suffering from the three Ds - death, divorce and deb
  - In April 2008 The Art Newspaper reported the establishment
    of the Meridian art fund and noted that ArtPlus, an "art
    trading company" based in Luxembourg, was seeking investors
  - ArtPlus, managed by Micky and Serge Tiroche, was reported
    as seeking US$200m to develop the Tiroche family art trading
    business, in which the founders hope to issue shares in three
    to five years. The brothers reportedly believe that "long
    term fundamentals have never been better for the art market".
    Micky Tiroche runs a commercial gallery in north London and
    co-founded the Tiroche Auction House in Israel. Serge Tiroche
    has been a Citigroup banker.
  - aims
    to invest in emerging art markets (primarily Asia, Russia
    and the Middle East) on the basis that "culture follows
    money" and "this is an opportunity to buy cheaply
  - Dean Art Investments
    announced the US$50m
  - In
    Australia The
    Art Fund
  - Gibraltar-based Castle Apollo
  - IndexAtlas, based in New York, also announced the launch of
    a fund in 2008.
Art Investment Funds: Models

www.caslon.com.au/artfundsnote2.htm - Preview

on 2009-02-24
- BNP Paribas fund
- BNP Paribas, reportedly lost
  over 40% of its US$8 million investment in art
- 6 more annotations...
- - The unpleasantness has been attributed
    to paying too much for works in the collection and failure
    to accommodate market conditions when planning sales
  - sponsorship of contemporary art events
  - profits being
    shared 70:30 between investors and the fund manager
  - The annual
    management fee was to be equal to 3%
  - The
    main reason why international art funds have underperformed
    and not fulfilled their potential is because they have been
    led by financial and not art institutions.
  - No financial
    institution can understand the aesthetics and history of
    art as a result of which no financial success is sustainable
    in the long run
Art Investment Funds: Operation

www.caslon.com.au/artfundsnote1.htm - Preview

on 2009-02-24
- Fund management involves a range of tasks, including
- raising
  capital
- 44 more annotations...
- - liaising
    with investors
  - identification
    of potential acquisitions
  - supervising
    works that have been acquired, for example ensuring that
    there is appropriate storage, transport, insurance and security
  - negotiating
    with curatorial institutions
  - determining
    when to unload the investments onto the market
  - selling
  - manager would be able to contribute
    capital to the fund (taken by some investors to be a sign
    of credibility) and to share directly in returns from disposal
    of works, for example take a percentage of the profit on a
    sale rather than relying solely on a fixed management fee.
    Philip Hoffman's Fine Art Fund, for example, is reported to
    charge an annual management fee equivalent to 2%
    
    of the fund's assets, with a 20% share of profits from sale
    of works.
  - one million and
    five million per investo
  - Investors would typically be locked into
    the fund for five to ten years;
  - stakes would not be tradable
    through a secondary market.
  - not been through a public prospectus
  - it is arguably not realistic to
    talk of an art investment fund industry
  - Financial institutions have considered establishing specialist
    funds but in practice have not proceeded, either because they
    have encountered difficulty raising capital for such funds
    or because they have recognised crucial difficultie
  - strategies employed by art funds are likely to take two
    forms
  - first is to trade recognised major work
  - A second strategy is to acquire, hold and then sell works
    that are more clearly undervalued.
  - Such works include those
    by artists who are recognised as important but not of the
    first rank.
  - It is a riskier strategy, because it involves some forecasting
    about what will be recognised in five, ten or twenty years
    time
  - However it is likely to be more profitable
  - The second strategy is analogous to buying shares in small
    but established high tech companies (rather than giants such
    as IBM), on the basis that they combine during possibilities
    for appreciation without the risks associated with investment
    in startups. Using that analogy blue chips, such as Picasso,
    will retain value but not show the same increase in value
    as less prominent competitors
  - Some funds have proposed offsetting costs by leasing their
    collection
  - Additionally,
    the Trust will deliver to its investors the ability to rent
    art from the Trust Collection
    
    at a favourable rate, and the ability to purchase works
    of art from it
  - That
    acquisition would involve an independent valuation. Rental
    charges are expected to be around 15 to 20% of a work's value.
  - professional investment adviser
  - Those advisers are the same sort of people working in client
    relations and management positions in private
    equity funds
  - have no background in the
    art
  - second stream is people with a background in the commercial
    art world,
  - they bridge the gap between
    the suits and technical specialists
  - contacts across the art world - scholars, journalists,
    curators, consumers and artists
  - public persona for marketing upmarket collectibles,
  - third stream is technical specialists
  - people
    who can tell an original from a reproduction
  - many fine arts graduates
    to do anything that brings them closer to their love or gives
    them a foothold in the industr
  - range of expenses throughout their operation
  - A salient cost is people
  - paying managers, advisers and a
    range of service providers from receptionists through to publicists
    and lawyers.
  - promotional and client relationship
    activity such as cocktail events and even one on one dinners
    with dealers and potential investors
  - storage, transport and insurance
  - nvestors could
    lease items from its holdings for an annual fee of 1.25% of
    the art's insured value
  - Transaction costs,
  - In aggregate those costs can be in the order
    of 10%, 17.5% or even 20% of the price
  - sales taxes
  - there are no operational
    guides or manuals about setting up and managing a fund.
  - information
    that allows comparison with other investment opportunities,
    for example statistical information about major stock market
    indices and venture capital
    fund performance
Art Investment Funds: Overview

www.caslon.com.au/artfundsnote.htm - Preview

on 2009-02-24
- has arguably attracted more media and academic interest
  than practitioners.
- desired liquidity, capital appreciation and revenue strea
- 28 more annotations...
- - Contemporary art investment vehicles (AIVs) emerged after
    the 2000.
  - increasing sophistication of part of the
    investment community
  - availability of capital
  - increased access to information about
    prices,
  - with
    investment in art being seen as hip, 'sexy' - far more exciting
    than speculation in pork bellies or copra futures - and even
    visionary
  - In practice performance by the BRPF was not spectacular (as
    discussed below the trustees might have got better returns
    by investing in the share market) and resulted in more media
    coverage than emulatio
  - Marketing by Merrill Lynch and Kidder Peabody of funds for
    speculation in classical coinage ended in pain for the investors
    and substantial losses for the promoter
  - over 23 funds based in Europe and North
    America
  - as of late 2008
    it is difficult to talk of an art fund industry that features
    a range of players, clear benchmarks for performance and transparency
    in competition
  - They do not aim to hold those works in perpetuity. The period
    of retention reflects the balance between
  - Regulatory frameworks are analogous to those of hedge funds.
  - It is
    easier to get capital from a small number of rich investors
    than from a large number of poor investors
  - That orientation also reflects administrative costs.
  - As a result proposals for art investment funds have
    centred on provision of capital by a single entity (the BRPF
    model) or by a handful of investor
  - Unlike
    property and shares, quality art is largely insulated from
    the volatility of investment markets providing vital diversification
    when markets are falling. The art market is considerably
    less volatile and is less sensitive to economic crises and
    geopolitical events than other assets. Compared to many
    alternative investments, art also involves low transaction
    and holding costs
  - One
    of the things that sustains the art market is an irrational
    faith in a continuous rise in prices
  - People fall out of fashion quite rapidly.
    So this idea of the inviolability of the modern art market
    is a fantasy.
  - It is clear, however, that
    
    not
    all works have appreciated at the same rate
  - rices
    paid for canonical works rise and fall in the short term,
  - prices
    rise and fall in the long term as works move in and out
    of the canon.
  - acquisition,
    maintenance and trading costs are tangible (expertise is
    expensive and is required because information about the
    market is thin, auction houses or dealers take 10% or more
    of the price, there is no dividend or rental stream to offset
    storage and insurance costs
  - prices
    are influenced by factors such as interest rates, inflation
    rates, endorsement by scholars and institutions, and 'behavioural
    finance' (ie perceptions that prices will rise steeply and
    with low risk, encouraging speculation
  - Peter Cannon-Brookes' 'Art Investment
    and the British Rail Pension Fund
  - Art
    as an Alternative Investment Asset' by Raya Mamabarchi, Marc
    Day & Giampiero Favato (here).
  - Jianping Mei & Michael Moses' 2002 paper (PDF)
    'Art as Investment and the Underperformance of Masterpieces:
    Evidence from 1875-2002'
  - Olivia
    Ralevski's 2008 MBA dissertation Hedging the Art Market:
    Creating Art Derivatives
  - Rachel
    Campbell's 2005 paper
    'Art as an Alternative Asset Class
  - Don Thompson's The $12 Million Stuffed Shark: The Curious
    Economics of Contemporary Art (London: Aurum 2008)

1 - 6 of 6

Showing 20▼ items per page

List Comments (0)

List Info

Yoav Dror

6 items | 2 visits

Updated on 2009-03-11
Created on 2009-02-24

Category: Business & Finance

URL:

Yoav Dror's List: Art Investment Funds

Dean Art Investments joins hedge fund platform Harbour Capital

Charles Saatchi to advise fine art hedge fund on investments

Art Investment Funds: Current Art Funds

Art Investment Funds: Models

Art Investment Funds: Operation

Art Investment Funds: Overview

List Info

Sponsored Links

Yoav Dror's Public Lists (5)