Bloomberg – In September 2004, Philip Hoffman did something unusual: He bought a painting he actually likes.
It was a work by Ed Ruscha, a pop art icon whose paintings hang in the National Gallery in Washington. Hoffman says he loathes some of the art he buys. In fact, he says he barely glances at paintings that have cost millions of dollars to acquire.
Hoffman, 44, is a new breed of investor in the $5 trillion art market. From a townhouse near Hyde Park in London, he manages an investment fund that buys and sells paintings rather than stocks or bonds. Since 2004, a dozen or so similar funds have tried to lure investors as the price of art has soared. So far, Hoffman’s is the only one that’s raised enough money to start investing.
Melding art and finance, art funds aim to trade Picassos and Rembrandts the way hedge funds trade U.S. Treasuries or gold — and collect hedge-fund-like fees in the process. Hoffman’s Fine Art Fund, for example, charges an annual management fee equal to 2 percent of its assets and takes a 20 percent cut of profits once the fund clears a minimum hurdle.
Hoffman, a former finance director at London-based auction house Christie’s International Plc, says his fund isn’t about beauty, truth and passion; it’s about making money.
“We take a completely cold view,” Hoffman says.
Hoffman’s investors need cool heads, too. He requires a minimum investment of $250,000, and investors can’t withdraw their money for three years.
