Art is Like a Hedge Fund

Lindsay Pollock on Bloomberg interviews James R. Hedges IV, a former hedgie now looking to create value for artists:

“I’m pragmatic about viewing art as a financial asset,’’ Hedges said in an interview this week. “I see it as an inefficient market that is misunderstood, that has got little in the way of transparency and limitations in the way business is conducted. But with all that being said, people can make a tremendous amount of money investing in this field.’’

Hedges cites similarities between the art world and the early days of hedge funds: Both are “cottage industries, relationship-based and with zero transparency. They really require special guidance.’’

Besides working with collectors in a traditional art- adviser role, Hedges aims to help artists, dealers and institutions find new ways to raise funds. […] Hedges’s art collecting began with photography. […] He moved on to the moderns, buying Matisse and Picasso drawings and a Calder mobile. He said he was buying in “a blue- chippy way.’’ He progressed to conceptual and minimalist artists such as Dan Flavin, Sol LeWitt, Richard Serra, Brice Marden and Ellsworth Kelly. […] Hedges got a taste of art production when he was hunting for a sculpture for his loft in Manhattan’s Tribeca district. He was enamored with a titanium cloud by sculptor Inigo Manglano- Ovalle (a large version hangs in Bloomberg’s New York headquarters) and approached the artist’s dealer about producing a smaller version.

Hedges funded the project — the production cost per cloud was $25,000 — got his sculpture and helped the dealer sell an additional five. The pieces are now valued at more than $250,000, according to Hedges.

“There are great commercial ideas that have existing audiences, and will garner financial support,’’ Hedges said. “You just have to go out and grab them.’’

Hedge Fund Player Dumps Finance Job to Guide, Invest in Artists (Bloomberg)