The Malay Mail Online Do art funds make money and sense? September 9, 2013Īrtnet Q&A with Art Fund Association president, Enrique Liberman September 19, 2013Īl Arabiya News 'Monet talks' as Mideast art investment proves a pretty picture May 30, 2013įorbes Six Risks to The Global Art Market in 2014 May 20, 2013įorbes 'New Era' For Art Markets As Collectors Drop Half a Billion At Christie's Contemporary Sale February 25, 2013 Telegraph Art Market News: New York contemporary art sale soars September 27, 2013 The Art Newspaper Art fund industry struggles to emerge from the gloom October 1, 2013 Washington Post Record auction at Christie's October 11, 2013įrance 24 New fronts open in Chinese art market as records fall October 3, 2013 Accordingly, art fund managers of incubators usually operate a tamer version of their ideal art investment fund. Finally, most prospective art fund managers either lack or are unwilling to personally risk the amount of monies that would permit the art fund to acquire the character and number of art works dictated by their ideal investment strategies.
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In light of the difficulty in generating significant returns on art investments in the short-term, many incubator funds must operate for several years before a sufficient marketable performance record is achieved. For one, the art fund manager is risking his own money in the endeavor and is not paid any management fees by investors for running the fund. Naturally, the use of an incubator fund structure has its drawbacks. In addition, as the incubator fund is not initially marketed to investors, no offering documentation is required to be prepared, thereby taking out the lion’s share of the legal costs associated with launching an art fund. By setting up an incubator art fund and utilizing his or her own money, an art fund manager can develop a proven track record without risk to third party investors. Such charges have a direct impact on the returns to be garnered from investing in works of art, which precludes the use of prior returns by individual dealers/collectors when marketing an art fund. For example, art dealers/collectors neither charge annual management fees and performance fees nor do they incur substantial legal, administration and accounting costs in connection with the formation and ongoing governance of an investment vehicle. While many art fund managers improperly cite their prior investment returns in connection with buying and selling art as a dealer or collector, such returns are not analogous to the operation of an art fund and therefore cannot be legally marketed to prospective investors. Unlike traditional hedge fund managers, who elect to start a hedge fund after years of successfully trading for a previous fund or financial institution, art fund managers have for the most part had no experience in operating an investment vehicle.
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The use of an incubator fund structure has become particularly popular among prospective art fund managers for a number of reasons.
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