Here’s a classic glass half full/half empty story about art funds. India has aggressively opened art funds in a way that few other markets have seen. It’s a nervy, even reckless, state of affairs. One of the first funds is from Osian’s. The fund just redeemed its art this month and should have provided a 5% annual return. Is that a success? In purely financial terms, no. But relative to the destruction of value in other assets, yes. It all depends on the attitude you take. Here’s Livemint (note: Rs100 crore is approx. $21 m)
Osian’s Art Fund (OAF), valued at nearly Rs100 crore, is due for closure on 10 November as per its redemption schedule. OAF’s chief adviser Neville Tuli says that the capital of unitholders has been preserved despite the market dropping by over 45%. But the rate of return is much lower than what was expected when the fund was set up in July 2006. Investors will now get returns of 5% a year as opposed to 20-22% (after tax), as the fund’s disclosure report had suggested in January 2007. […] However, in the same period (9 July 2006 to 6 November 2009), the Sensex gained 51.23% and gold rose 77.08% on the Multi Commodity Exchange of India Ltd. Funds with redemption dates already set, such as Osian’s, have to sell at whatever price they get at the time of closure. Funds that are scheduled for closure in late 2010 and 2011 may face a better fate.