Castlestone Collection of Modern Art fund invests in museum quality art from after the second world war, seeking works by non producing or deceased artists. It has a high minimum investment level of £10,000, but that's vastly lower than building your own collection.
The fund's investment objective is preservation of capital and the creation of long-term wealth, while providing a hedge against inflation. Since launch just over two years ago the fund has made strong positive returns, and managing to keep slightly ahead of its benchmark index, AMR Post-War 50 Index over one year.
Castlestone says that independent research shows that post-war art has been the best performing category over five, 10 and 25 years, and is less volatile. The fund favours mid-tier art (pictures which cost up to $1m) as these are easier to buy and sell, although the fund uses an eight-year buy and hold strategy rather than trading paintings regularly. The aim is to run the fund for eight years after which its investors will vote on whether to continue it, and will have an option of coming out even if the fund continues.
If you withdraw your funds before then you will face a penalty which will be set according to the amount you pull out, and whether the fund has to sell a painting to meet the redemption.
As at the end of March the fund held 32 pieces by 25 artists, but its aim is to have between 80 and 120 holdings in the portfolio, from between 30 and 60 artists. These can include any form of art including paintings, but also sculpture and photography. The fund's managers favour artists with strong auction results included in the AMR Post-War Art 50 Index because this gives the fund a closely correlated performance guide.
The fund can lend the art to museum exhibitions, literature and other promotional activities. Art works which are displayed in museums or gets public exposure tend to appreciate in value faster than those in private homes or vaults.
The fund's managers choose pieces of art via a four stage process:
• art market research;
• evaluation such as quality criteria;
• an assessment of whether it meets portfolio criteria such as diversification; and
• risk management including due diligence on authenticity.
The fund is not covered by the UK Financial Services Compensation Scheme because it is offshore, domiciled in the British Virgin Islands. This also means you cannot buy it direct from Castlestone; you may need to use an IFA, but you can also buy it through some Sipp platforms.
The fund charges a 1 per cent management fee, a 1.25 per cent administration fee, and a performance fee of 20 per cent. It also has an entry fee of up to a maximum of 5 per cent of subscription price. While this is not cheap, the fund allows access to a highly diversified art portfolio for £10,000 plus these charges - which is a lot less than you would have to pay to acquire, store and insure a similar portfolio yourself.
The fund is run by a team of four including senior art adviser Constanze Kubern, who previously worked at Sotheby's, and Castlestone chief executive officer Angus Murray, who has a background in banking and equities. The investment committee also works with external art dealers such as Gagosian and Wildenstein.
CASTLESTONE COLLECTION OF MODERN ART
|SIZE OF FUND||$13.45m||3 MTH PERFORMANCE||3.54%|
|SET UP DATE||March 2009||6 MTH PERFORMANCE||10.97%|
|MANAGER START DATE||01-Mar-09||1 YR PERFORMANCE||30.80%|
|STANDARD DEVIATION||11.59%||TOTAL EXPENSE RATIO|
|SHARPE RATIO||0.37%||MORE DETAILS||www.castlestonemanagement.com|
Source: Castlestone Management
Performance data as at May 2011.
Examples of holdings
|Keith Haring, Untitled (Andy Mouse), 1985|
Roy Lichtenstein, Nude in an Apartment, 1995
Andy Warhol, Five Guns, 1983
Lucio Fontana, Concetto Spaziale, Attese, 1965
Jean-Michel Basquiat, Untitled (Head), 1986