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May 21, 2009

A New Art Investment Fund Has Been Started By Castlestone Management

A New Art Investment Fund Has Been Started By Castlestone Management with offices in London and New York.

Andy_Warhol_Dollar_Signs The alternative asset class investment adviser has started a brand new Art Investment Fund with 25 million dollars of partner's money.. and it is now open to additional investors!

Hmm.. maybe it's a good time to buy Contemporary Art? No? What do you think?

FYI.. But, So far they've already purchased $16 million in art, in mostly the free falling contemporary art market, and plan to purchase another $9 million over the next few months.

(Photo #1, Andy Warhol, Dollar Signs, 1981, silkscreen on canvas )

They plan to diversify their purchases across 26 artists, mostly focused on dead artists or big names at the end of their career (aka..the soon to be dead artists). 

When MAO first started art collecting, one of our good friend at Sotheby's once told us,  "The only good artist is a dead artist...!!"  But then again.. he had been drinking a few too many strong cocktails at Fire Island at the time, and he worked in the Old Masters Department at the auction house.  So maybe he is a bit biased advising Castlestone Management.

Well, so far they have purchased art works by Chuck Close, Daimian Hirst, Richard Prince, Jean-Michel Basquiat, Lucio Fontana, Willem de Kooning, and Alexander Calder.  So basically they have purchased all the most overpriced and over hyped  hot contemporary names in the art world. After looking at the people working at Castlestone Management, it's not clear if anyone on their staff has any experience curating a contemporary art collection, or even an Art History education. Yikes!

But Castlestone has also just announced 2 new unnamed hires from Sothebys  (who've not yet started working at the fund).   But at least it's nice to see a professional investment vehicle focused on Art as an asset class. We at MAO wish them all the luck in the world with their new art investment fund!

OH.. and for all those hungry, starving, dying "ambitious" art dealers left out there... CALL Angus Murry ASAP,  cause he is the Castlestone CEO, and he's still got $9 million left to spend on overvalued contemporary art.

Castlestone Management LLC, Head Office

610 Fifth Avenue Suite 602 , Rockefeller Center

New York, NY 10020

Phone: +1 212 387 9600 Fax: +1 212 586 0850

Farah Nayeri from Bloomberg News posted a story yesterday afternoon on Castlestone.. See below...

-----------------------------------------------------------------------------------------------

Art Is Good as Goldin Inflation Era, Castlestone’s Murray Says
2009-05-19 23:00:01.7 GMT


Interview by Farah Nayeri
     May 20 (Bloomberg) -- Framed close-ups of two elderly men
hang in Castlestone Management’s London meeting room. One of the
men smiles and looks away; the other sullenly faces front.
     These large photographs by Chuck Close -- bought for
$25,000 each -- are of artists Robert Rauschenberg, who died
last year, and Jasper Johns, 79. They’re part of a new
Castlestone art fund.
     The fund is designed as an anti-inflation shelter at a time
when recession-busting stimulus packages are flooding the global
economy with cash. To Castlestone, which has some $660 million
under management, scarce art -- by dead artists, or by big names
in late career -- is as good as gold.
     “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.

                        Basquiat, Fontana

     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.”
     At the Sotheby’s Impressionist and Modern Art sales in New
York this month, Murray bid $250,000 on a Matisse
bronze
sculpture
, “Venus Assise,” which sold for $326,500 including
fees. He also bid $1.25 million on a Rembrandt Bugatti
sculpture, “Grand Tigre Royal,” which sold for $1.87 million
with fees.

                          Losing Value

     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.”

                      Inflation Hedge

     New York-based art dealerRichard L. Feigen, who deals in
European paintings from 1300 to the present, views art as a
“valid refuge” at a time when collectors are “worried about
inflation.” Yet he adds a note of caution.
     “A bar of gold is a bar of gold,” he says. “No two works
of art are the same, unless they’re editions of a print.”
     For art to be a good investment, Feigen says, it must be of
“permanent importance” to art history, of “museum quality”
to lure institutional as well as individual buyers, and of
interest to more than one part of the world.
     In Feigen’s view, art funds lack specialists with the depth
of knowledge to pick out the right works, and are prone to
invest in overvalued art. He cites Basquiat as an example; he
says the painter, who died at age 27, “made no permanent
contribution to art history” and is “vastly overpriced.”
     Murray says the dearth of affordable art specialists
“would have definitely been a very accurate description six
years ago. However, there’s a whole lot of people who don’t have
a job at the moment.”
     “The redundancies we’ve recently got from Christie’s and
Sotheby’s have helped,” he said.
     Castlestone says it has just hired two people who
previously worked with Sotheby’s, and will not disclose their
names until they begin work.

                          Murray’s Money

     Most of the art in the portfolio has been bought with
Murray’s money: He has invested four-fifths of the initial $25
million, and his partners, the rest. Those investments won’t be
touched for eight years, says Murray.
     Castlestone’s 1 percent annual management charge, and the
20 percent performance charge on the fund’s gains, will be
reinvested over the period. After eight years, the art will be
sold at an auction that Murray hopes Sotheby’s or Christie’s
International will hold.
     Interested retail investors must put in a minimum of
$10,000 or 10,000 pounds (depending on which currency they want)
and go through financial advisers in Castlestone’s network.
Murray expects an average investment of $25,000 to $75,000. The
fund has agreed obligations amounting to another $21 million
already.
     In eight years, Murray hopes “I can actually stand up and
say: ‘Here’s a catalog from Sotheby’s that shows you I bought at
this price, I sold at this price, this was the independent
annualized return of 11 percent. It worked. We were right.’”


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I just don't understand the appeal at all of giving someone else money to buy artworks in the hope that you might make a little bit of money back. Why not just put your money in a mutual fund. It's not as though you get to actually enjoy any of the artwork. If all you want is monetary return buy stocks. This is ridiculously stupid. But I guess the CEO gets bragging rights about owning a Basquiat. I wonder if he sneaks these works home to hang up while all the suckers give him money to 'invest.'

Do you know of A art investment funds list?

I have to agree with bob. I have a hard time thinking of art as I would think of a stock on the stockexchange

Thanks for the comments..

I agree with bob.. BUT FYI..investment professionals are always looking for investment vehicles where their values movements do not closely correlate to stocks or interest rates. Hence Art and some commodities might exhibit this behavior..hence making for better diversification potential in multi-asset investment portfolios. So there maybe a useful place for Art Investment funds. We shall see.

And to Mike's question..

MAO think's there are only 2 Art Investment Funds currently open for buniness.
The new one by Castlestone, and the one mentioned in the Bloomberg News story.. The Fine Art Fund Group run out of London.

I had the opportunity of visiting Richard Feigen's office on a tour with my intern group, and I think the man knows his stuff which is why I will have to agree with his Basquiat comment. I feel like the modern art world today is more about names than it is quality, and Feigen seemed to have a good eye for quality. I wonder what he will think of all of the Dash Snow speculating going on now. Thoughts?

I am a professional artist Anna Kronick, (MFA). 

I developed intricate multi-layered decorative paper cuts (museum quality).

I would like to present my artwork for your consideration.

You can see my paper cuts at: http://akronick.wordpress.com/

I appreciate your time and attention.

Sincerely,

Anna Kronick

Castlestone Management would be wise to call Brian Wood in Syracuse, NY at 315-424-9663 -- gallery hours are 10 to 5 M-F and 10-4 Sunday.

He has over 1500 original paintings by Fred Fisher -- people are raving over his paintings and they are priced very low. Fred has passed, and his paintings have never been shown or sold until now through Brian's Fine Art Gallery. According to family, Fred only sold a few paintings in order to purchase more paint supplies. This is one heck of a chance to get in on the ground floor.

NICE

Intersting post, even more interesting comments. Investing in stereo type art as most investors invest in what the critics stick their thumbs up to... boring if you ask me.


Great to see a collection of blog posts that includes thoughtful and perceptive commentary. Keep up the great work!!!

You can find a list of more art funds here:

http://www.newbizviews.com/2010/03/03/why-art-wont-be-the-next-hot-alternative-asset/

Also includes an explaination of why most of these funds failed. The Fine Art Fund appears to be the exception of success.

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