Andy Warhol-based fund says art boom to go on

Date: Friday, October 12, 2007
Author: Jan Dahinten, Reuters.co.uk

By Jan Dahinten

SINGAPORE (Reuters) - 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, told Reuters in an interview.

"The U.S. subprime 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, something that makes people less confident, 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 $600 million in assets in its funds of 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."

MAO MONEY

Moccia's Cannnonball Art Fund, which he describes as an asset-backed fund, requires individual investors to put up at least 100,000 euros (70,000 pounds).

He charges investors a 30 percent performance fee in case the fund sells a piece, but has no other charges. Typically, hedge funds charge a 2 percent entry fee, and a 2 percent management fee on top of a performance fee of 20 percent.

"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 $122,000 (60,000 pounds). 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 organised by him, Moccia said that prices for prints have gone from $2,000 to more than $100,000 in recent years -- a price level which allowed a fund to make good returns.

"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."

"As long as you buy art and hang it in your dining room and you enjoy it and appreciate it and on top of that it appreciates in value -- fantastic. But if you're mixing the joy of having art in your house with an investment than you may think of giving your money to someone who does it professionally for you."