KEY POINTS:
A hedge fund that invests in prints by Andy Warhol, the pop artist known for his brightly coloured paintings of Campbell soup cans, is betting the boom in the art market will continue because of increasing global wealth.
The prediction comes as prices for paintings and sculptures at
art auctions in New York and London are fetching tens of million of dollars as new buyers lock horns with long-time collectors in a battle for masters ranging from Monet, Matisse and Picasso to Bacon, Warhol and Hirst.
"There will be a correction in the art market but it will not be a prolonged correction. I would not expect it to be more than six months," Federico Moccia, director and founder of investment firm Cannonball Funds, stated in an interview.
"The US sub-prime crisis didn't affect the art market. But should the economy in the United States slow down more or should there be a financial crisis, prices at auction may level off or come down.
"But people who have not entered the market yet will see that as buying opportunity."
Moccia, a former JPMorgan investment banker who set up his own firm in 1998 and manages US$600 million ($777 million) in assets in hedge funds, is focused on investments in Warhol's works for now but may look elsewhere for returns for his art fund.
"We will continue to do Warhol. Clearly prices have become expensive so it will become harder to find pieces that make sense today. We don't only look at Warhol but also others such as (Roy) Lichtenstein or Keith Haring."
Moccia's Cannnonball Art Fund, which he describes as an asset-backed fund, requires individual investors to put up at least €100,000 ($183,400).
Typically, hedge funds charge a 2 per cent entry fee, and a 2 per cent management fee on top of a performance fee of 20 per cent.
"I'm trying to go for artists that are super-well known and that have produced enough so that there's enough in the market to make a market."
He says that around 10 or 20 Warhol works, such as prints of late Chinese Chairman Mao, become available at auction every month.
"I bought many Maos and recently at auction the Maos hit a record and went to US$122,000. My average entry price was much, much lower. This strategy took two years because you have to find the prints."
Speaking ahead of a six-day Warhol exhibition next month in Singapore, Moccia said that prices for prints had gone from US$2000 to more than US$100,000 in recent years.
"More and more people are buying art because they see it as an investment." The point is that unless you do it in a professional way, you're bound to be satisfied by its artistic value but not necessarily by its financial value.
- Reuters