Kaminsky's Call: The Art of Investing
Damien Hurst, Gerhard Richter, Felix Gonzalez Torres.
Richard Prince, John Currin, Takashi Murakami.
Why am I leading today's K-Call with names of some of the most prominent artists of the late 20th century?
As much as I enjoy the occasional cultural deviation, all intertwine with Wall Street on Saturday at a major event in Manhattan.
Sotheby's will be auctioning over 150 of these art pieces and expects to fetch over $10 million. And on a personal level, it hits close to home.
I am very proud of the years I spent managing money at Neuberger Berman. I cherish memories of the experience, and I will never forget the most impressive art collection of 107-year-old, Co-founder Roy Neuberger. Working in offices adorned by his most spectacular possessions was inspiring and they in turn captivated clients galore. The artwork became part of the firm's identity.
When Lehman Brothersacquired Neuberger Berman in 2003, the highly-esteemed art collection was included in the riches. To Lehman's credit (and that is a rare phrase these days, for sure) they remained dedicated to expanding the vision of Mr. Neuberger.
When Neuberger Berman became independent in 2009, they bought back a significant part of the artwork from the Lehman Estate—and retains over 400 pieces to this day.
It wasn't just a laudable gesture to a pioneer, but also a wise investment strategy.
During the "lost decade," so many lost tangible assets; that has been well-documented. Less chronicled was the proliferation of art purchases by hedge fund managers in the mid-2000's. Many attributed the phenomenon to "ego-buying," but there was a credible inherent strategy.
If collected intelligently, the decision becomes a boost to diversification. Granted, these assets are frequently illiquid, but for long-term holds, if one knows what they're buying in terms of artist’s legacy and rarity of the piece, hidden jewels exist.
This is a risky market, but on the flipside, the theorem that when expensive items are collected with passion and knowledge, value increase will correspond.
I cannot overemphasize the importance of hard assets here. Why are so many pointing to gold as the trade of the year? It's a hard asset. Why would Roy Neuberger'spieces amassed since 1990 capture buyer interest at Sotheby's this weekend? They are hard assets.
If hedge fund titans started buying in 2005, they saw their investments reach high benchmark levels in 2007. Then, 2008 happened, and a value reduction by half was common. But after speaking with an expert on the industry, that fifty cents on the dollar has already increased to sixty-five cents in 2010. In the art world, that is a substantial year-to-year appreciation.
I wouldn't be surprised if attendees at Sotheby's resembled a who's who on Wall Street. The Lehman and Neuberger names alone plant the seed that something eclectic and lucrative can be had.
I find this trade to be fascinating. Maybe it is my devotion to the good years spent at my former place of work. But the inspiration of fine art coupled with its recent bloodline to Wall Street participation, it all creates a platform to ponder.
Programming note: "The Strategy Session," hosted by David Faber and Gary Kaminsky, airs weekdays at Noon ET on CNBC.
Gary Kaminsky does not hold any equity positions.
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