Big art for big money - William Verdult
Friday, September 4, 2009 at 10:00AM 
According to the Financial Times, hedge funds have had a big impact on financial exchanges around the world, but they have also made their presence felt in an unexpected quarter: the art market.
The ranks of hedge fund managers began growing – and coming into large sums of money – just as the art market began to boom.
Like previous waves of the nouveau riche, they plunged in. They have emerged not only as big collectors, but also as big donors to museums and fixtures on the art circuit.
Ken Griffin, the founder of Chicago-based Citadel, recently bought a 1959 painting by Jasper Johns, “False Start”, for $80m. He also gave $19m to the Art Institute of Chicago’s new modern division, and said he would lend the painting to the museum.
His wife Anne Dias Griffin – who is also a hedge fund manager – is on the board of the Whitney Museum.
They are part of the new wave of collectors whose tastes are shaping the market and also sending up prices of their favoured artists.
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US museums, unlike those in the UK and Europe, rely on private philanthropy for money and artworks.
Often a museum will invite well-connected collectors on to its board in the hope of getting a new fundraising channel and possibly becoming a beneficiary of all or part of the collection.
Also on the Whitney board are Steven Mnuchin of Dune Capital and David Ganek, a short-seller who collects Richard Prince and Jeff Koons.
The impact of the hedge fund managers’ purchasing power has not been evenly felt.
They tend to have tastes very much geared to contemporary and postwar art, especially towards clever, conceptual works such as those by Damien Hirst, Richard Prince and Takashi Murakami. The value of Prince’s work has risen five-fold in the past three years.
The infusion of new money has powered the contemporary art market, with prices in the sector rising far above the rest of the market.
Hedge fund managers also favour what are now referred to as “classical” postwar artists, such as Jasper Johns, Willem de Kooning, David Smith and Mark Rothko, whose works are now garnering more than $50m in both auction and private sales.
Amy Capellazzo, the head of postwar and contemporary art at Christie’s, says: “Hedge fund managers are not monolithic. But I do notice in my talks with buyers that there is a correlation between the kinds of questions they ask, their sensibilities, and the business they are in.”
“The technology people are very interested in the future, in the new, what is going to be the art of tomorrow.
“If it is a bluechip stocks guy, he is often a buyer of the more classical postwar pieces.
“One overarching statement about hedge fund buyers, would be that they are decisive, they are risk-takers, and they understand the market and the nuances very quickly.
“On the whole they are interested in 20th century decorative arts, photographs, and postwar contemporary, but especially the more modern pieces,” she says.
Steve Cohen, the founder of SAC Capital, has spent more than $600m on artworks and is widely mentioned as a collector.
His best known purchase is one of Damien Hirst’s formaldehyde sharks, which recently had to be refurbished after it started to fall apart.
However, this is dwarfed by his purchase last year of a painting by Willem de Kooning for $137.5m.
Adam Sender, a Manhattan-based hedge fund manager, has a collection that includes Richard Prince, Cindy Sherman, Andreas Gursky and others, and which is valued at $100m.
The inflow of hedge fund money has not been uniformly welcomed.
In addition, it is whispered that some managers are trying to control the market in certain artists, by buying up heavily with a view to creating scarcity, then selectively selling at a high price.
This is hardly new: the same complaint has been levied against the influential British collector Charles Saatchi.
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