Hedge Fund Woes May Slash Art Prices

Aug 17 2007 | 12:43pm ET

The subprime mortgage market collapse is poised to sink a very different kind of market: the art market.

Los Angeles billionaire Eli Broad knows both markets well. He’s one of the top ten art collectors in the world, according to ARTnews, and he was also part of a group of investors pouring $1 billion into a troubled Goldman Sachs hedge fund. And he says losses in the latter industry are going to have a big effect on the former.

“Many of the buyers of contemporary are have been hedge-fund managers and other investors who obviously are having a difficult time and have lost lots of money,” he said in an e-mail statement. “The art market will soften, and an adjustment in values will take place, but it may not happen for six months to a year.”

Prices of contemporary artworks have quadrupled over the past decade, but Broad said in June that he expects a price plunge similar to that of the 1990s, when prices halved.

“Typically, when there are adjustments up or down in the art market, it follows what happens in the securities and real-estate market,” he added.

Three of Broad’s fellow top-tenners are alternative investments moguls: SAC Capital’s Steve Cohen, Citadel Investment Group’s Kenneth Griffin and Kohlberg Kravis Roberts’ Henry Kravis. Also in the top 100 are Level Global’s David Ganek, Third Point’s Daniel Loeb and Exis Capital’s Adam Sender.

There are already signs that the art market is weakening: Last month, some 40% of the pieces in an Old Masters auction failed to sell. Damien Hirst has also failed to find a buyer for his $100 million piece “For the Love of God”, a cast of a human skull encrusted in 8,601 diamonds. Cohen, of course, owns Hirst’s most famous piece, a dead tiger shark suspended in a tank of formaldehyde.

RELATED STORIES:

Kings of Alts, Kings of Art
Wynn Settles Suit Over Painting Cohen Coveted

Damien Hirst's "For the Love of God"Damien Hirst's "For the Love of God"

In Depth

Q&A: Decathlon Capital On Revenue-Based Alternative Lending

Oct 30 2017 | 3:49pm ET

The explosion in private credit activity since the end of the financial crisis is...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Saxby: Not All EBITDA Is Created Equal

Nov 30 2017 | 8:02pm ET

Record levels of dry powder are driving competition among private equity firms to...