An art hedge fund has raised £10m and hopes to secure £25m by the time it launches this summer, demonstrating the soaring interest in exotic investments.
The Art Trading Fund is thought to be only the second launch of a hedge fund manager investing in art and the first to attempt to hedge its investments against a fall in the market, using derivatives.
The launch of the fund, structured as a Guernsey-listed closed-end company, comes as some hedge funds are beginning to invest in art and wine as part of their search for returns not linked to stock and bond markets.
Chris Carlson, co-founder of Artistic Investment Advisers, which is setting up the fund, said the aim was to offer “significantly less correlation” to traditional investments than other hedge funds, mainly by trading art for short periods.
Several hedge funds have been putting money into art, according to Philip Hoffman, chief executive of Fine Art Management Services, which runs the first art hedge fund, the Fine Art Fund, and two sister funds.
He said a handful of hedge funds had become co-investors in pictures bought for short-term trades and “one group are just putting up $5m (£2.52m) to invest in some of the pictures we are buying”.
Wine is also attracting hedge fund money, according to Peter Lunzer, who manages almost £10m in the Wine Investment Fund. He has one hedge fund investor that put in £1m to reduce its own volatility and is in talks with others.
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.
The fund will use several strategies, including buying work direct from a group of 10 established contemporary artists to sell on, buying privately from distressed sellers and trading impressionist and post-impressionist works.
Get alerts on Markets when a new story is published