Capitalizing on the Art Market's Structural Inefficiencies

Looking again at the Hirst Lullaby — a vitrine stuffed with enough to drugs to zonk a rhino — I'm beginning to understand how today's contemporary art has come to be so bluntly commoditised by hedge fund managers and other arriviste speculators. Earlier this week, (June 11, 2007) a director of London-based 'Artistic Investment Advisers' (a hedge fund to you and me), told the Financial Times, "I love the beautiful, sophisticated things in life, but for me art is just a commodity, it's a cold thing ... I see art as a p&l [profit and loss] on the wall." In case you missed it the first time, his company is called Artistic Investment Advisers.

His is by no means an unusual worldview in the current market, however, as new profit-driven forces make their presence felt. 'Flipping' — buying, before selling quickly (often in just a few moths) for short-term gain — is typical of the strategies that are becoming more and more common and which could bring about deep structural change in a previously traditional market more accustomed to 10 to 15-year holding periods.

Before our very eyes the art market is being transformed from a realm managed (at least in part) by critical aesthetic analysis, taste and connoisseurship into one amenable to all kinds of insider-trading, hedging and speculation. But the new players bringing about these changes are merely capitalising on the art market's structural inefficiencies, which is what every art dealer has always done.