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exotica
This page offers a perspective on art investment funds by
considering funds devoted to investment in exotica such as
Madonna and Michael Jackson memorabilia.
It covers -
introduction
Given the prices paid for furniture, stamps, and contemporary
memorabilia (and even murderabilia)
such as Audrey Hepburn's iconic little black dress (£467,200),
1847 Mauritius Blue stamp (US$3.8m), Lennon's piano (US$2.08m),
Eric Clapton's Stratocaster guitar (US$0.95m) or lock of hair
cut from Napoleon's head the day after he died ($15,500) enthusiasts
will continue to attempt to launch investment funds that specialise
in a particular class of collectibles.
Funds for investment in exotica will encounter the same difficulties
experienced by fine art funds. In practice most trading is
likely to involve small private consortia rather than commercially-managed
funds whose capital is provided by institutions, superannuation
trustees, insurance companies and banks.
Enthusiasts can always indulge in personal acquisition of
exotica: one reader kindly pointed us to a site promoting
"investment quality" snakes (presumably just the
thing if your name is Gomez or Mortisha but not the thing
for us, particularly given maintenance requirements such as
provision of live rats for the python's dinner).
2007 and 2008 saw announcements that several 'memorabilia
funds' had or would be launched. As with the art funds noted
on preceding pages, some caution should be used in construing
particular announcements, given that solicitation of funds
may be conditional and accordingly a fund may not reach fruition.
potential concerns
One concern about such funds is the assumption that fans will
drive an increase in prices paid for items associated with
particular celebrities.
That assumption is debatable, given that the recognition of
most celebrities fades (few people have heard of Clara Bow,
the Madonna of 1920s, or either of the two Engelbert Humperdincks)
and that celebrity can turn to notoriety (claims - substantiated
or otherwise - of paedophilia have reduced the lustre of Michael
Jackson and Gary Glitter).
Memorabilia-based funds may therefore turn to celebrity indices
such as those maintained by Market Evaluations Inc. (responsible
for celebrity Q-scores and Dead Q-scores measuring recognisability
and both positive negative appeal), the Davie-Brown Celebrity
Index ("the ability to influence consumer purchase intent")
and the Ulmer Scale.
Another concern is whether increases are primarily attributable
to multiple acquisitions by a major collector (such as Charles
Saatchi), whose departure from the market sees prices go into
free fall. Critics have wondered aloud about potential conflicts
of interest.
Two final concerns are authenticity and exploitation.
Are the items within a collection authentic? What is their
provenance? Do they have the same status as the 'Marilyn Monroe'
memorabilia
that dates from a decade after her death?
Does the collector have valid title to those items?
Does promotion of an item or collection conflict with restrictions
under personality rights regimes?
memorabilia
In
September 2008 Marquee Capital Growth Partners foreshadowed
launch in February 2009 of The Marquee Capital Entertainment
Memorabilia Fund.
It indicated that -
the
assets compiled by Marquee Capital prior to the February
2009 launch of the investor accessible fund are approximately
80% represented by Madonna focused memorabilia. The Marquee
value of this entertainment icon's name is such that the
managers feel Madonna's celebrity is almost unmatched, and
therefore a major goal of the portfolio will be to acquire
significant stakes of Madonna memorabilia which exists in
the markets. For investment purposes, such focus on a single
icon serves its purpose in the ability to increase the value
of assets by using publicity and events around which to
create a buzz of interest. For example, in conjunction with
the launch of the fund, Marquee Capital has organized the
first Madonna centered gallery exhibition which will be
held in London.
The
portfolio will include memorabilia from "other entertainment
figures across the film, music, and sports industries determined
by the celebrity status risk categories" identified by
Marquee's strategy, including presumably priceless trinkets
from Michael Jackson. The Fund managers will supposedly use
"very rigorous" "analytics", claiming
that "there is a strict methodology behind
what we decide to buy and at what price points we make our
purchases".
Marquee has a target of US$25m, with investors being locked
in for five years. The Fund's promo indicates that -
Although
all exit strategies will be considered, the most likely
outcome will be to sell the company to another financial
services organisation seeking to offer a diversified investment
product to its customer base
The
fund's assets are categorised as -
- Appreciation
- assets "that are one of a kind, and have
an exclusivity that continues to increase its value".
- Abitrage
- assets that are "not intended to be held for a long
period of time, but purchased and held for a specific amount
of time to utilize the creation of publicity, awareness
and buzz for selling at profit".
- "Investment
generation" - items "such as the collection of
Madonna costumes and clothing which will be used in the
gallery event to generate income"
In
response to the question 'What experience does the management
team have in investing in alternative assets?' Marquee indicated
-
Buying memorabilia requires experience. It is very
easy for the inexperienced to inadvertently either purchase
a fake or pay too much for an asset. Our Chief Executive
has been collecting memorabilia since the age of 15. Moreover,
over the past few years, he has been actively building relationships
with dealers and auction houses across the world. He also
has considerable experience in buying and selling celebrity
memorabilia. As of August 2008, our CEO is the single largest
shareholder in the company.
A
wizened sceptic
might perhaps hope for more than a teenage passion for Madonna
bustiers, Michael Jackson bling and John Lennon's bathrobe.
Some investors will think otherwise and hand over their money.
London-based Anchorage Capital Partners has promoted a Guitar
Fund, with a target capital of US$100 million. In mid-2008
it indicated that
launch
of the Guitar Fund is contingent on finding a lead investor.
This is such a different asset class. People are reluctant
to take the lead.
Anchorage
was "confident of finding a lead investor by October
so that the fund will be ready by January" 2009.
Sarah Hodgson of Christies told Bloomberg that "Madonna's
performance at auction has been up and down depending on the
material'' and that the market for non-celebrity guitars had
"slowed a bit'' in recent years, with declines of between
10 and 20% (particularly for instruments that had not been
owned by leading musicians).
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