The Kansas City Star spends some time with Sandy Kemper and learns more about his plans for a new investment vehicle to launch this fall. The fund’s American Masters Collection has an interesting definition of American art:

Kemper launched the Collectors Fund in 2007. Its first investment vehicle, the American Masters Collection I fund, deals in 20th century American art pieces costing less than $500,000. Artists represented in the collection include Marsden Hartley, Thomas Hart Benton, Robert Motherwell and photographer Cindy Sherman. Among paintings sold in 2010 are works by Helen Frankenthaler and Franz Kline. To join the fund, an investor originally had to put up at least $100,000. Because of the gains it made, the minimum was raised to $135,000. It was closed to new investors in December. The fund is now valued at $20 million. [...]

The fund distributes 40 percent of the profits made from each sale to its members and uses the rest to buy more art. Kemper said the fund’s internal rate of return, a way to measure the growth of investments over time, has averaged 28.5 percent annually. The fund will liquidate around 2017, the exact date depending on market conditions, and distribute its assets to the shareholders. Kemper said that although most members invested in the Collectors Fund for financial reasons, it provided a few unique perks: visits to artists’ studios, behind-the-scenes tours of auction houses and opportunities for members to display the art in their homes.

“It’s financial. It’s aesthetic. It’s social,” Kemper said. “Having appreciation for art and doing well financially are not opposing forces.” This fall the Collectors Fund will launch its second venture, the American Masters Collection II. It will invest in pieces starting at $500,000.

Kemper-Led Collector’s Fund Banks on Art, Not Stocks (Kansas City Star)

There’s been lots of talk this past year about art funds but one under-appreciated aspect of the idea is that many other institutions are already operating as de facto art funds. Take the example of Australia’s Artbank which is described in this Sydney Morning Herald profile of its director, Geoffrey Cassidy:

”We’re about supporting living artists,” says Cassidy, 51, who spends about $1 million each year on works from emerging and mid-career artists. ”We want to spread the love.” Artbank was set up by the federal government in 1980 to support young Australian artists by buying their work and then renting the pieces out to companies, government offices, embassies and private art lovers. It now owns more than 10,000 works by 3000 artists, making it the biggest collection of Australian contemporary art, valued at more than $35 million.

Profile: Geoffrey Cassidy (Sydney Morning Herald)

Bloomberg profiles a new Brazilian art fund:

Brazil Golden Art: BGA Private Equity Investment Fund is part of the Rio de Janeiro- and Sao Paulo-based firm Plural Capital, which is putting money into Latin America’s largest economy.

“While most of the modern and contemporary art markets around the world were hit hard by the 2008-2009 economic crisis, the Brazilian auction market recorded a 38 percent increase from 2008 to 2009,” the London-based research company ArtTactic said in its latest report about the country. [...]

The BGA fund is worth 40 million reais and will buy contemporary works, mainly from Brazil. Initial external investment for the new fund was 10 million reais short of the target capitalization, Bruno Miguel, an analyst at Plural Capital, said in an interview.

“The fund will spend three years investing, then two years uninvesting,” Miguel said. “We may sell the whole collection to a museum or gallery. We’ll see what the best option is at the time.” [...]

“Despite the overall strong performance in the Brazilian contemporary art market, the sector remains narrow, with only four or five artists driving the market and the prices,” ArtTactic said. “We believe the recent auction performance by Varejao and Milhazes will increase confidence among consignors and buyers, and we are likely to see a broader range of Brazilian artists coming to the auction market.”

Brazil Art Price Surge Lures Billionaires to $24.4 Million Fund (Bloomberg)

One of the panels at Artelligence earlier this week covered art funds and the conference goers were three deep around the fund managers after the session ended. With the results published in the Christian Science Monitor yesterday, it’s no wonder why:

In its three years, the nearly $20 million fund has returned 28.5 percent annually on sales from its collection.  [...] Its first offering, called the American Masters Collection 1, has already reached its financial goal and is closed to new investors, reports its chairman, Alexander Kemper. That 10-year fund, which required a minimum investment of $132,000, was available only to qualified high-income and/or high net-worth investors.

Cayman Islands-based Artemundi Global Fund, which debuted last April, “is currently about one-third of the way toward its goal of becoming $150 million-to-$225 million,” reports the fund’s CEO, Javier Lumbreras, who manages it from Mexico City. The fund requires a $250,000 minimum investment for individuals.

It’s faring well so far, by all appearances. In its first year, the fund sold 20.7 percent of its holdings, achieving an average 150 percent return on each painting sold, Mr. Lumbreras says.

Art Market: Masterful Returns (Christian Science Monitor)

All the talk of the risks involved in professionally managed art funds in the US, Europe and Gulf States pales in comparison to what Australians are doing all on their own. There a system of Self-Managed Superannuation Funds (SMSFs), comparable to IRAs in the US, allows investors to hold some of their assets directly in art. Those provisions were challenged recently by a government report:

According to a regular ATO report on the funds, as of December, $573 million was tied up in artwork, collectables, metal and jewels. Although a review into the super system chaired by Jeremy Cooper recommended stopping SMSFs investing in art and collectables, and for funds already holding such assets to divest themselves, the federal government has decided the market should continue, with some restrictions.

But the Sydney Morning Herald’s story on the failure of art dealership catering to SMSFs who wanted their assets stored, insured and even producing revenue through a rental scheme, shows just how hard it can be to treat the art market as an asset for small investors.

Gilt-edged art market deals blow to super investors (Sydney Morning Herald)