Art market: masterful returns
Art funds let you own a share of a portfolio. Some funds have bested the S&P 500.
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For those aiming to seize such opportunities, an art fund provides one avenue of investment. Investors own shares of a fund but not the underlying art. Proponents say this offers distinct advantages.Skip to next paragraph
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For example, there's diversification. "Buying art pieces individually, someone might be able to afford only one-to-two art works," says Mr. Liberman. "But with a $200,000 check to a fund, you can get equity in a portfolio of 50 to 60 or more pieces of art," which helps hedge against any one artist's work declining in value.
Not everyone is enthused. Nate Kacew, an art collector and a principal in a New York City marketing firm, prefers to own the art itself. Prominent New York City art dealer Richard Feigen says, "There's no good way for the public to access the art market except by getting good advice and buying art works individually."
Currently, in the United States and Europe, there is only "a handful of art funds being sold" that are available to qualified members of the "public and registered and [often] sold through wealth advisers," says Michael Plummer, a principal at New York City-based Artvest Partners, an art investment advisory firm.
Collectively, existing funds' assets total "no more than $200 million," he estimates, out of an art market that carried out $57.5 billion of transactions in 2010. Although new funds are now "in discussion," they would need the backing of a major bank or auction house to attract assets in the hundreds of millions of dollars, he says. "Most funds would aim to be that size."
The Collectors Fund, however, has done well on a much smaller scale. Its first offering, called the American Masters Collection 1, has already reached its financial goal and is closed to new investors, reports its chairman, Alexander Kemper. That 10-year fund, which required a minimum investment of $132,000, was available only to qualified high-income and/or high net-worth investors.
Cayman Islands-based Artemundi Global Fund, which debuted last April, "is currently about one-third of the way toward its goal of becoming $150 million-to-$225 million," reports the fund's CEO, Javier Lumbreras, who manages it from Mexico City. The fund requires a $250,000 minimum investment for individuals.
Its diversified portfolio ranges from old masters, to 19th century impressionists, to postwar and contemporary art. Its collections include such well-known Latin American artists as Frida Kahlo.
It's faring well so far, by all appearances. In its first year, the fund sold 20.7 percent of its holdings, achieving an average 150 percent return on each painting sold, Mr. Lumbreras says.