Another Art Fund is Founded: How Long Until it Founders?

Chris Carlson has decided he’s had enough of prop trading,

and so he’s moving into the art world instead, setting up an art

hedge fund. Apparently it’s already "raised" £10 million,

although I suspect that a very large chunk of that belongs to one C. Carlson.

Art is not something which lends itself to being invested in by dedicated hedge

funds, and I don’t think that Carlson’s hedge fund is going to do particularly

well. (It’s also not going to be particularly lucrative for Carlson: even with

20% returns and $40 million under management, 2-and-20 comes to only $2.4 million

– and that’s top line, not bottom line.)

There’s certainly a lot of money to be made in the art world, but the real

money is made by being willing and able to hold art for long periods of time.

In that respect, art is more like property than like securities. Carlson’s fund,

however, is called the Art Trading Fund: he wants to be able to move in and

out of art like others move in and out of stocks. Oh, and he wants to hedge

himself, too:

Mr Carlson, a former proprietary trader at Deutsche Bank and UBS, and two

co-founders, are aiming to hedge their investments in pictures using exchange-traded

options that they believe are closely correlated to the art market.

It sounds like what Carlson wants to do is play his eye for undervalued art.

He’ll buy an impressionist "cheap", for instance, hedge the broader

art market using exchange-traded options, and then sell the painting at a profit.

It all seems a bit dubious to me.

I’ve got a better idea for Carlson, who seems to think that he can replicate

art-market returns in the options market: create a tradeable instrument which

mirrors the art market. If it works, I think there could be a lot of demand

for it.

This entry was posted in art. Bookmark the permalink.