The incomparable Jori Finkel tells the story of the original, and possibly only truly successful, art fund in The Art Newspaper. In 1904, André Level created an art fund that liquidated 10 years later for nearly four times the initial outlay. Although this early fund is often referred to, Finkel gives us great detail that reveals the fund to be more of a buying club than an art fund.

It also seems to have pioneered a form of artist’s guarantee whereby Picasso was paid a 300 franc deposit on his Family of Saltimbanques, the fund’s most successful purchase, and given the opportunity to improve upon the 1000 franc purchase price by finding another buyer.

Here Finkel lays out the terms:

Level laid out the basic principles in a contract signed in February 1904. Each investor would contribute FF250 a year towards art purchases for the collection, to be dissolved after ten years. Should the enterprise prove profitable, they would receive their money back, plus 3.5% interest. Any further profits would be distributed to Level (20%) and the artists (20%) before going to the investors. In the meantime, investors would have access to the works to decorate their homes. Level would serve as the director and would decide on each acquisition, with the help of a two-person advisory committee that had the power of veto. The group was young (most members were under the age of 30), and most were bankers and businessmen who played cards together.

The story of the original and greatest art fund  (The Art Newspaper)

The Fine Art Fund doesn’t report its results publicly but that isn’t stopping its chief, Philip Hoffman from trying to tip his hand. Katya Kazakina’s farewell piece from ArtBasel includes what has recently become a common feature of her reporting, Hoffman announcing his results. Not only does the art fund head claim that his firm will manage half a billion dollars in art assets by the end of the year—note the artful phrasing because in other reports Hoffman suggests the firm has moved away from running an art fund toward providing art advisory services to Gulf State clients—but he also tells Kazakina that he made $1.2m profit on a Christopher Wool painting he bought in 2007 (the peak of the previous market) and sold in 2012:

Walking through the fair on opening day, Hoffman said he was alerted that another buyer was interested in an artwork the fund had agreed to purchase earlier that morning. By the end of the day Hoffman resold the work to the new buyer.

“We made 10 percent on the deal,” he said, declining to name the artist or reveal the price. “We never paid for the work. We just netted the profit.”

Hoffman, who started the company in 2001, said he consigned several works to dealers at Art Basel, selling almost $5 million worth of art and averaging compound gains of 10 percent to 20 percent.

Most of the art the fund acquires is valued at $1 million to $10 million, Hoffman said.

Billionaires at Basel Bet Art Better Investment Than Cash (Businessweek)

APT owns 10,000 works of art by 2,000 artists from 75 countries.

$120m: APT’s valuation of its collection

$500m: APT’s projected valuation of its collection in 40 years

2,002: the amount of works added to its collection last year

200: the number of museum shows the fund loaned works to last year

500: the number of museum loans it anticipates this year

8: the number of geographical trusts in New York, Los Angeles, Mexico City, Beijing, Mumbai, Dubai, Berlin and London

628: the membership limit for APT Global One, the most recently launched trust

The Art Newspaper covers some of the steps APT is taking to liquidate some of their holdings in an orderly manner:

The sales process will be “slow and careful”, says APT’s chairman and co-founder Moti Shniberg. “It’s not going to be any kind of fire sale.” The company recently hired four specialists to liaise with potential buyers, and each transaction must be approved by a five-member advisory committee: former Whitney Museum director David Ross, former Mori Art Museum director David Elliott, adviser Mary Hoeveler, former JP Morgan Chase Collection artistic director Manuel González, and Brook Hazelton.

Artists’ pension trust starts to sell (The Art Newspaper)

The Wall Street Journal’s roundtable on investing in art explored a number of topics. Here’s the group’s take on which categories have the best investment potentail:

WSJ: Which art categories have the most and least investment potential?

MS. KUBERN: The old masters category has shown stable results over the past 10 years, and it will probably remain at that level due to the very mature nature of the market. Prices for the postwar and contemporary art category have also reached record-breaking highs, but here the phenomenon of an ever-growing collectors base and a slowing down in supply of museum-quality works by blue-chip artists is pushing up prices even further. The fact that art has finally been accepted as a meaningful way to protect investors’ cash during economic difficulty, paired with wealth from emerging markets such as China entering the category, has elevated demand. Short of options to divert their cash into, investors are holding tight to their art assets and hence create a shortage in supply.

MR. HOFFMAN: There are certainly different capital requirements for investing in the various art-market genres. The old masters tend to have higher purchasing prices and smaller margins as compared with contemporary works. However, potentially it is the contemporary pieces which can muster the most significant returns. For someone investing in art with us, we often advise that they spread their investment across the various fields, to mitigate loss. This, as implied, shows that the contemporary market is regarded as the most volatile with the old master works standing as the most reliable. This is by no means a rule, however, and so often the auction houses and dealers are surprised by unsuspected losses or gains.

MR. PLUMMER: Old masters is the least-volatile category (emerging contemporary is the most), but it has the least growth potential of all of the major sectors. Also, within the impressionist and modern sector, and this may sound counterintuitive, Picasso and possibly Warhol (in the contemporary sector) are now slower-growing.

The contemporary sector is where all the growth is truly happening now, but this is also a cause for concern. In the market crash of 2008, contemporary art prices fell by 50%.

It is not impossible that this could happen again since, despite what anyone says, the art market is cyclical.

How to Invest in Art  (WSJ)

Georgina Adam reports that SplitArt has filed for bankruptcy taking €5m of capital with it and marking another attempt at financializing art that has not worked out. Though similar-sounding schemes for trading art shares have been established in Asia and France, none have yet to prove successful:

This ambitious but controversial attempt to create the world’s first “stock exchange for art” ended in liquidation in the Luxembourg courts at the end of last year. The project, which at one point employed 18 people, aimed to turn art into a fungible asset by splitting it into “certificates”, which could then be traded on an exchange. Most of the funding came from an Israeli source, and Deloitte Luxembourg, which has an active art and finance service, helped to promote it but without investing in it. The idea was that the owner of a work of art would put it into SplitArt, which would convert it into “certificates” tradable on an online multinational trading facility. But the project ran aground after a split (!) between investors about its direction. One minority investor said: “The majority wanted to build an IT platform and stock exchange to make money, but the minority saw the project as a way of creating a new transparent, liquid, efficient market.”

 The Art Market: Bid to Save the Planet (Financial Times)

Georgina Adam provides a rare and valuable glimpse into an art fund with some results from Gil Brandes of Artpartners who has made 30% on the sale of 5 works from his Artpartners fund which invested $9m with a 5yr horizon. (Adam doesn’t make it clear whether the 30% return is based upon the $9m total or the purchase price of the five works sold.)

“We did well on two [Haruki] Murakamis, [Rudolf] Stingel, [John] Chamberlain and in a small way on Cindy Sherman,” says Brandes: “And we are hoping to do well on a [Donald] Judd. But we have taken hits on a Jonathan Meese sculpture, a Jack Pierson, a Franz West and Anselm Reyle.” The worst case, not surprisingly, was a large Damien Hirst butterfly piece that the fund bought for $1.5m, now being resold for just $1m.

Artpartners is raising a second fund that will invest $25m over 10 years according to Adam.

The Art Market: Top of the Charts (Financial Times)

“Investible Art Market” Is 3k Pictures Sold Yearly; We Buy 100

Philip Hoffman claims Qatar are buying $2.5bn in art each year which accounts for a quarter of the $10bn investible art market, according to his calculations. He sees Abu Dhabi and soon, Saudi Arabia, close behind with this buying setting up a 10-year art boom:

Click on the image to see the CNBC WEX clip.