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Hedge Funds and Art

$8 million formaldehyde shark. YUM!You know, I debated mightily before posting this, lest we give rise to rumors that Jews do well in finance. But then I considered my own meager IRA holdings and realized that, well, you can’t make generalizations.

So anyway, here goes about Hedge Funds and, of course the Fabulously Wealthy and Jewlicious individuals who run some of them and collect art. Expensive art.

For more than a century, successive generations of Wall Street titans have lavished their riches on art, hoping that a Monet or a Cézanne might add a bit of polish to the rough edges of their deal making. Now, young, little-known billionaires who manage hedge funds are roiling the art market, using the vast pools of capital they have accumulated to snatch up some of the world’s most recognizable images.

Leading the way has been Steven A. Cohen, a publicity-shy hedge fund magnate living in Greenwich, Conn., who took home $350 million in 2003 and even more last year, according to people close to him.

15 Comments

  1. […] srael. This is a no-brainer, and needs to be implemented asap. For more on why, please see comment, #13 and view the link in there. […]

  2. Yakov Smirnoff

    3/3/2005 at 6:25 pm

    Maybe YOU can’t/won’t make generalizations, but the answer (to your almost unspoken question and fear of anti-Semitic backlash) its obvious. The whole article is littered with refences to Pearlstein, Kravis, Lauder et al in the world of high-finance and art collecting. 90% of the surnames mentioned are, well, JEWISH!! Nu??!! there’s no “denial” here, bubbie…Little Stevie Cohen is a Yid of the first-order. A short, photo-phobic, hyper-security-sensitive nebbish raised on Long Island’s Great Neck Gold Coast–oy what a mensch! And single…could he also be gay? What a shonda!

  3. T_M

    3/3/2005 at 6:44 pm

    Um, Yakov, you’re not that clever are you?

  4. Yakov Smirnoff

    3/3/2005 at 7:33 pm

    TM–Am I now on the Jewlicious “watch list”? What’s next–triple secret probation and a trip to Yeshiva Rebbe’s office?

  5. T_M

    3/3/2005 at 7:34 pm

    Yakov, the Jewlicious Secret Police of the Elders of Zion is on your ass. Watch out!

  6. Dina

    3/3/2005 at 7:35 pm

    That shark looks really cool.

  7. T_M

    3/3/2005 at 7:37 pm

    Dina, for a mere $8 million you can have one too.

  8. Yakov Smirnoff

    3/3/2005 at 7:41 pm

    TM–A wonderful new acronym you coined: JSPEZ…i love it..hahaha 🙂

  9. T_M

    3/3/2005 at 7:44 pm

    Better quit joking around now, Yakov. It ain’t funny and we know where you live…

  10. Dina

    3/3/2005 at 9:34 pm

    I’m going to start saving up now. Then I’m gonna find me a nice Jewish boy with a nicer bank account and nab it!

    Okay, that was really just a joke.
    Really.

  11. Dina

    3/3/2005 at 10:16 pm

    Can I also mention that I really hope these guys give a J.Lo tushyload of money to tzedaka because the first time I ever realized what money means was when I was on a sorta class trip to Sotheby’s for an auction and people were bidding millions–millions–of dollars on ugly vases. I was actually physically nauseated by it and the only thing that helped my breathing come back to normal (aside from the fresh air on the sidewalk when I walked outside) was that people who spend that much on art (which I know is different than just buying something because it’s an investment) usually spend that same kind of money on charities and getting onto boards of charities and philanthropic work. Still sickening, though.

  12. T_M

    3/4/2005 at 6:40 pm

    Dina, the article mentioned a Picasso that was bid up to $100 million. Mr. Cohen bid $80 million. I’m sure for him it’s both a passion and an investment. He would have been able to sell that painting for a similar amount, if not more. Giving it to charity would bear different rewards, but man, could Jewish educational programs use that money.

  13. Esther

    3/7/2005 at 11:44 am

    I don’t even understand what the phrase “took home $350 million in 2003 and even more last year” means. Couldn’t that eradicate world hunger? Or entitle every Jewish child to several years of Jewish education (call it “birthright Education”)? Or sponsor starving Jewish artists (not that I have anyone in particular in mind)?

  14. T_M

    3/7/2005 at 2:01 pm

    No, Esther, $350 million would be a large drop in a very expensive Jewish education bucket. Educating each child in a Jewish school probably costs anywhere from $10,000 to $18,000 per year (I’m talking about the school’s costs, not the parents’ cost). So this $350,000,000 would cover the cost for one year of between 17,000 to 30,000 Jewish students. Sounds good, except then the money would be gone and the next year there wouldn’t be any money unless Mr. Cohen made this much every year, which is highly unlikely. Ideally, we need money for the full 13 years from k-12.

    So god invented all kinds of financial instruments like trusts, endowments and foundations that run endowments. The $350,000,000 would essentially be parked in a variety of investments, and the proceeds would be used to finance ongoing costs. Except that no more that 4% – 10% can be released in any given year in order to ensure the principal remains at approximately the same level, and to hedge against inflation. Additionally, you have to worry about bad years in the market and how successful the investors running the endowment are, since even one negative year can hurt the principal amount substantially.

    So let’s say, optimistically, that the $350,000,000 generates an average 8% a year ($28,000,000) and of that 8%, about 5% goes to expenses of running the endowment. You are left with $26,600,000. Even at the low end of $10,000 per student, this only covers 2,660 students. If you’re able to get parents to cover half of it ($5000), you’re still only helping 5,300 students. Not bad, but not great.

    Accroding to Avichai and CAJE, http://www.caje-cbank.org/research-njps2.pdf, there are approximately 200,000 Jewish day school students in the U.S., of whom approximately 105,000 are Haredi, another 37,000 Orthodox (all groups). The remainder belong to non-Orthodox schools, although some of the “community” schools may have Orthodox standards.

    Now these schools receive funds from numerous sources, so that Mr. Cohen’s money wouldn’t need to serve 200,000 students, but the point is that it’s not enough. Even if you exclude the Haredi students and just focus on Orthodox and non-Orthodox, you are talking about 120,000 students taught by 16,000 teachers (not all full time, I presume).

    You also have to also remember that the $350,000,000 is taxed, so Mr. Cohen doesn’t get to keep all of it. Plus he’s got, uh, living expenses.

    Having said that, if a bunch of people like Mr. Cohen got together and put together a serious endowment for Jewish education, we’d have something. It requires a serious commitment, but I can tell you that if you look at the top charity benefactors in this country, you have a significantly disproportionate number of Jewish donors. If they took even a fraction of their generosity and directed it toward a Jewish education endowment, we could save Jewish education in this country.

    I say this as a parent who constantly needs to address the issue of the costs of a Jewish education. It is damn hard to provide it. The financial pressure is immense and relentless. It affects my current standard of living, my ability to save for college and definitely our retirement (ha!). Many of our friends won’t even do it because of the cost ($10,000- $13,000/year in my area). If it were half the price, life would be much simpler and I’m sure the schools would grow considerably. Sadly, the resources aren’t there.

    I don’t blame Mr. Cohen, it’s his money and his right to spend it as he pleases. For all we know, he might be a very generous benefactor to charities. It is the fault of people like me who haven’t been able to make the case to the Steve Cohens of the world that this is as important, if not more, as anything else toward which they might spend their money.

  15. Esther

    3/7/2005 at 6:04 pm

    Aww, T_M. Don’t blame yourself. Except for too much math in the above comment, which has now given me a headache.

    And lest you think I have no grounding in reality, I knew that $350 mill wouldn’t solve those problems entirely. But lo aleinu ham’lakhah ligmor, y’know?

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