The Art Newspaper

Downturn hits art investment funds

Plans to inject at least $200m into the market have been shelved

By Melanie Gerlis | From issue 201, April 2009
Published online 8 Apr 09 (News)

Peter Doig, Iron Hill, 1991. Fine Art Fund claimed a 107% profit when it sold for £1.3m in 2006

LONDON. Several art funds launched during 2008—including one that Charles Saatchi was advising—have failed to secure the required cash from investors, The Art Newspaper has learned.

The London-based Art Trading Fund, which launched its second fund in May 2008, has had to “delay” its plans as it was “unable to raise the necessary amounts”, co-founder Chris Carlson said. The fund aimed to raise $50m to invest in contemporary art and boasted Mr Saatchi as one of its consultants. While potential invest­ors had verbally committed around $35m to the fund, only $15m came in, according to Mr Carlson. The company’s first fund, which raised $10m in 2007, was likely also to “take a hit” he said, but added that this would be “nothing catastrophic”.

Meanwhile, Meridian Art Partners, a New York-based fund that aimed to raise $100m during 2008, has also run into difficulties. Co-founder Andrew Littlejohn said that it became apparent towards the end of 2008 that the drop in confidence “precluded most investors from being interested in longer-term investment vehicles”, particularly something that is “as esoteric as art”.

He and his co-founder Pamela Johnson, both previously at Phillips de Pury, had planned to invest in emerging art markets but, he said, they found that problems at the private banks with whom it had partnered, together with recent scandals such as the Bernard Madoff fund fraud, had dampened investor enthusiasm.

Funds that buy and sell art on behalf of a group of investors proved popular during the boom. Philip Hoffman, who launched the London-based Fine Art Fund five years ago, says his funds are a success, although his returns cannot be independently confirmed. He believes that “without a track record, new funds will have a terrible time in this market environment”. Even his company has felt the effects: he admits that it lost one major investor in the Middle Eastern fund launched last year, for which it is hoping to raise $30m.

Dean Art Investments, which aimed to raise $50m, is also said to have been unable to attract the necessary capital. Its chairman David Thomas did not wish to comment.

Market sources add that a planned €100m fund—a joint venture between Phillips de Pury and Milan-based Advanced Capital that announced its intention to launch last summer—has also found it difficult to get investors. Further, Phillips de Pury’s managing director, Brook Hazelton, who was to co-manage the fund, left the auction house earlier this year. But Advanced Capital said it has been waiting to get the green light from the Italian authorities before beginning the official marketing process, so its launch date has not yet been announced. Simon de Pury of Phillips de Pury confirmed that formal fundraising began at the end of March, adding that Mr Hazelton’s departure from the firm was “completely independent from the development of this enterprise”.

Meanwhile, Mr Littlejohn, Mr Carlson and Mr Hoffman all now speak of the opportunities offered by “distressed sellers” of fine art—ie those who need cash more than their paintings.

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