You can't hang it on the wall, but a new managed fund investing in art will offer an alternative to the familiar fare of shares, gold, bonds and property.
And it can be safely hung in your DIY fund.
The problem in owning, say, a Brett Whiteley is that looking at it could give you some joy, something that is frowned upon under the super rules because it fails the "sole purpose" test of providing for retirement. A Whiteley bolted down in the basement with a time delay combination lock set for the day you plan to retire might, just, get around the rules.
The Australian Art Fund , run by 2D Funds Management , set up by former Macquarie Bank executives Warwick Evans and Paul Banks , will invest in modern and contemporary Australian paintings, photographs and sculptures and is seeking $10 million.
The minimum investment is $10,300, including a 3 per cent up-front contribution fee.
The fund's upside is that art is enjoying a financial renaissance and investment in the fund is in two instalments.
The prospectus says the fund can earn extra by trading art, leasing some of its collection and interest from short-term deposits.
Art prices jumped 5.8 per cent in the half year to June 30, the Artprice Global Index shows.
As a non-financial asset art and other collectables are becoming a popular way of diversifying investments.
The Australian art market index has increased 12.4 per cent annually over the past five years while the index of Australian late modern artists published by the Australian Art Market Movements Handbook has outstripped shares, bonds and international shares in the past decade.
The downside to the fund is that the up-front fee although it may be possible to get this back if you go through a fee-for-service financial adviser is the first of many.
There's a 1.75 per cent management fee, which could rise to 2 per cent, and a performance fee of up to 15 per cent if the fund does better than the five-year bond rate (about 6 per cent).
But then, as the prospectus argues, art is unique and so "may require specialised treatment compared with many other types of assets".
Advisers include Ian Hicks , deputy chairman of the National Gallery of Victoria Foundation ; Professor Sasha Grishin , head of art history at the Australian National University ; and art experts Chris Deutscher , Pat Corrigan and Damian Hackett .
"Art is no longer regarded as simply an object of pleasure more and more investors are conscious of its potential as an investment asset," 2D Funds Management director Evans said.
"As recent reports have demonstrated, art can achieve impressive returns comparable to the more traditional investment classes.
"By taking a professional and more disciplined approach, we hope to match if not improve on these returns," he said.
Art prices are booming because of demand from private, institutional and museum buyers on one side and a limited supply of quality works on the other. But art investing needs the inside dope.
"It is very much about knowing which artists to invest in and when to buy and sell," 2D Funds Management chairman Michael Kenyon said.
The market wasn't transparent so "even knowing what to invest in doesn't necessarily mean that you will be able to find what you are looking for, or will know what price you should pay".
How it works
Opens March 31 and closes April 29
Invest a minimum $10,300 in modern Australian oil and synthetic polymer paint on canvas or board, works on paper, photographs and sculpture. Prospectus from www.australianartfund.com.au
Pros
Pay $1 a unit now, 50 cents next year.
Closed fund - no new subscriptions taken after April 29.
Strong market.
Good for diversification.
Cons
No dividend. The aim is to shut down the fund after six to eight years when artwork is sold and profit distributed to unitholders, either as a return of capital or a franked dividend.
Fees.
Small size ($10 million) makes it illiquid.
No track record.
