Institutional Investor's Alpha Magazine - November 2007 - (Page 42)

Investing in Art Advisory Services in New York, who has been in the business for 25 years: “The average hedge fund manager uses his business model to acquire art — all with the knowledge that only a few acquisitions need to increase in value for the art investment to pay off.” Financiers have always played a major role in shaping the art market. The Medicis, great patrons of Italian Renaissance art, were bankers. During his lifetime, Robert Lehman, the longtime head of Lehman Brothers, augmented his parents’ already large collection, which was given to the Metropolitan Museum of Art after his death in 1969. The almost 3,000 pieces include Italian Renaissance, Old Master Dutch and Spanish paintings; jewelry; textiles; bronzes; and more than 700 Old Master drawings. Hedge fund managers, however, tend to be secretive about collecting art — even more so than they are about investing. David Ganek, 44, of long-short equity ﬁrm Level Global Investors, who has been collecting for more than 20 years, declined through his lawyer to comment for this story. His lawyer cited “SEC regulations” prohibiting hedge funds from marketing. Loeb would go on record regarding the financial markets but not his art collection, and a spokesman for Cohen says he maintains a strict policy of not discussing art publicly. The handful of managers who broke the code of silence would do so only if their anonymity were protected. Art consultant Sandy Heller, whose eponymous New York–based firm counts several investment managers as clients, thinks that competition is at the core of hedge funds’ silence. He says that for the same reason managers like to mask their trading — to avoid copycat investors’ stealing their ideas — they are cautious about publicly supporting an artist. One ﬁnance industry insider and longtime art collector, who didn’t want to be named, offers an alternative theory: “Hedge fund guys are pretty highly paid to make investments,” he says. “They don’t want to be seen as anything less than completely focused.” The art world, of course, has its own tradition of conﬁdentiality. Information is circulated through a combination of rumor, gossip, articles and the occasional press release. There are no publicly accessible records of who bought which works from whom at auction or privately or from a dealer. This lack of transparency is familiar ground for many hedge fund managers, who are used to operating in opaque markets. Hedge fund managers’ appetite for competition serves them well in the contemporary art market, which — bubble or not — has experinced a surge in popularity and prices over the past decade. Christie’s and Sotheby’s May 2007 postwar and contemporary evening auctions brought in a combined $822 million, up from $118 million in May 2002. European, Middle Eastern and Asian buyers are rushing into the market, thanks to a healthy global economy and weak dollar. NonU.S. collectors are a bigger presence than ever at the major New York auctions, and they’re buying contemporary American art, which used to be of interest mainly to U.S. buyers. “It’s getting to be a crowded ﬁeld, and it’s highly compet- “The galleries must protect an artist’s career in addition to their business,” says collector Adam Lindemann. shelled out millions for a collection that includes almost 70 works by German painter Martin Kippenberger and a dozen by Richard Prince, an American artist best known for his works that reuse photographic images of cowboys. Managers who buy in this league have become a force in the art world. Billionaires Cohen and Grifﬁn, ranked second and third in the 2007 ARTnews list of the planet’s 200 biggest collectors, can have a huge impact on galleries and auction houses simply by deciding to add a piece to their respective collections. Late last year, Cohen created a stir when he bought Willem de Kooning’s Women III from entertainment mogul David Geffen for $137.5 million. Although hedge fund managers have been criticized by some collectors and dealers for their aesthetic judgment — Cohen was the butt of jokes after it came out that the Hirst shark he bought was rotting — as well as for inﬂating what many are calling an art market bubble, most have shown the same dedication, focus and intensity in collecting art that they have used to such advantage in managing money. “Their minds are always thinking of investment,” says Ralph Lerner, a partner at law ﬁrm Sidley Austin in New York. Lerner, an art law specialist and co-author of Art Law: The Guide for Collectors, Investors, Dealers and Artists, has several hedge fund managers as clients. “Hedge fund managers understand the difference between an A-plus picture and a B picture, even though it’s the same exact artist, because the market treats those pictures differently,” he says. Adds Thea Westreich, principal of Thea Westreich Art 42 • INSTITUTIONAL INVESTOR’S ALPHA • NOVEMBER 2007

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - November 2007

Institutional Investor's Alpha Magazine - November 2007 Contents Letter from the Editor Longs & Shorts Pension Corner: Patriot State The Good Guys: College Connection Interview: Currency of Change Cover Story: Comeback Kid Strategies: Masters of Art Research Center: Alpha Awards: Top Technology Providers Top Analysts Alpha Bytes: Critical Choice Unhedged: Commentary: Banking on a Bubble

Institutional Investor's Alpha Magazine - November 2007

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