Art Funds Again

This is a couple of days old, but wanted to give it a mention.  It seems a new art fund has launched:

Chris Carlson has decided he's had enough of prop trading,   and so he's moving into the art world instead, setting up an art hedge fund. Apparently it's already "raised" £10 million, although I suspect that a very large chunk of that belongs to one C. Carlson.

Art is not something which lends itself to being invested in by dedicated hedge   funds, and I don't think that Carlson's hedge fund is going to do particularly   well. (It's also not going to be particularly lucrative for Carlson: even with   20% returns and $40 million under management, 2-and-20 comes to only $2.4 million   – and that's top line, not bottom line.)

I was similarly skeptical on the idea the last time we talked about them.

Of course, it's boom times in the business right now:

A Francis Bacon painting smashed the auction record for postwar art last night in New York, fetching $52.7 million. Its reign lasted just 10 minutes, before being trumped by a Mark Rothko work that went for $72.8 million.                

Rothko's hot-hued "White Center (Yellow, Pink and Lavender on Rose),'' from seller David Rockefeller Sr., and Bacon's fierce crouching Pope, "Study From Innocent X,'' helped propel the 74- lot auction at Sotheby's to a record $254.9 million. Before tonight, the highest auction price for an artwork from the period was a $27.1 million Willem de Kooning in November.         

"Money has no meaning,'' (ed: emphasis added) said Angela Westwater of New York gallery Sperone Westwater, after the Rothko sold. "It's a good work, but the whole marketplace is crazy.''

It's just like the 80s again.
         

Comments

[KipEsquire]

There is no such thing as "investing" in art; there is only speculating in art.

An investment requires a forecasted stream of future cash flows. Anything that is not expected to generate a stream of future cash flows is not an "investment."

So, for example, one cannot "invest" in art (one "speculates") -- but one can "invest" in an art gallery. One cannot "invest" in gold (one "speculates") -- but one can "invest" in a gold mining company. And so on.

The failure to understand the difference between investing and speculating is the principal reason most laypersons underperform the market so badly.