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Art investment firm to close

Date: Thursday, December 17, 2009
Author: Rory Jones, FT Adviser

Artistic Investment Advisers (AIA), the firm behind The Art Trading Fund, is to liquidate this month.

Co-founders of AIA, Justin Williams and Chris Carlson, launched the fund in June 2007 marketing it as the first art hedge fund, due to its unique shorting strategy. The entrepreneurs enlisted the advice of ex-advertising magnate and art expert, Charles Saatchi, in return for sponsorship of the Saatchi Gallery in London.

A meeting of AIA creditors will take place at the office of the liquidator, Wilkins Kennedy, on 12 January 2010.

AIA was not available for comment on the pending liquidation of the company or the fundís £10.2m assets under management. However, a Saatchi spokesman stated that, "At present we have never been contacted for advice, but AIA are a paid-up sponsor and we would give advice if asked."

Fine Art Wealth Management, a consultancy, estimates that the number of global art funds has collapsed by 40% since the Lehman Brothers bankruptcy.

"Pre Lehman we estimated there were over 50 art funds globally at various stages of development. It is unknown exactly how many art funds exist globally today. However we believe the number is probably closer to 20," Randall James Willette, managing director, said.

The Art Trading Fund aimed to buy artwork in the lower to middle market range, paying up to £1m, while shorting 10 to 15 different economic indicators and securities that the directors believed exhibited a 96% correlation with the art market.

When the fund was launched in 2007, AIA was is the investment adviser to Art Investment PCC, a Guernsey regulated investment company. Minimum investment in the fund was £100,000 and was aimed at high net worth investors. At the time, it was said to be the first and only art hedge fund to "aggregate the primary and secondary art markets." It intended to provide a liquid high return investment over a three year closed end period with a targeted annualised return of 30%. Despite our enquiries, we were unable to establish what growth had actually been achieved, if any.

Carlson began his career at hedge fund UBS OíConnor, working as portfolio manager for the US$1bn European Risk Arbitrage and Special Situations Fund. In 2003 he joined equity proprietary trading desk as Deutsche Bank before setting up AIA. Williams previously launched property magazine, Fabric.

AIA also had plans to launch an art Vulture Fund that had a lock in period of five years and targeted annualised returns of 15% by exploiting sales from distressed art sellers.