Bloomberg continues its coverage of Castlestone’s new art fund:
As long as the value of money falls, the value of real assets will rise,” says founder and joint chief executive officer Angus Murray, 39. “Art to me is exactly the same asset as gold bullion.”
“The two assets are running in parallel,” says the Australian-born Murray, who wears an open-necked white shirt with his suit trousers. “The devaluation of money is affecting both.”
The global economy is in its worst slump since World War II, and will shrink 1.3 percent this year, according to the International Monetary Fund. The U.S. has introduced a $787 billion stimulus package to combat recession.
Murray pulls out a sheaf of graphs showing how gold has tripled in price this decade. Art, too, is an “irreplaceable, unleveraged, real asset.” As the value of money erodes, art will appreciate over the fund’s eight-year life, says Murray.
Castlestone has bought $16 million worth of art and plans to spend another $9 million by the end of September to create a diversified portfolio of about 26 artists. They include Jean- Michel Basquiat, Lucio Fontana, Willem de Kooning and Alexander Calder. The priciest work so far is a Basquiat that cost $1.2 million. Another $885,000 was spent on a De Kooning.
The portfolio also has a Damien Hirst butterfly painting, bought after Hirst said he would stop making them, and a Richard Prince “Nurse” painting. Otherwise, says Murray, active contemporary artists are avoided, as their work is “replaceable.”
The big question with Castlestone’s portfolio is whether Murray bought an $8 million Prince “nurse” painting, a $5 million “nurse” or a $3 million “nurse.” The rest of the story suggests Murray’s “nurse” painting was at the lower end of the range:
Art already bought by Castlestone for the fund has shed a third of its value, says Murray. “I had a house, it went down in value too, but I’m not going to change my view on that,” he shrugs, saying this makes it a good time to enter the market. Prices of contemporary art at auction have fallen 30 percent to 50 percent in the last six months.
The London-based Fine Art Fund Group gives equal weighting to Old Masters; Impressionist and modern art; and contemporary art. It has lost 20 percent to 30 percent of its value in the last year, and now manages around $100 million, according to Chief Executive Philip Hoffman. Until the end of 2007, the fund had an average annualized return of 23 percent, says Hoffman.
This year is a “bad time” for selling, “but acquiring art is unbelievably attractive,” says Hoffman. At the same time, he says new funds lack a track record: “Art is a dangerous thing if you don’t know what you’re doing.”
Art is as Good as Gold in Inflation (Bloomberg)