Artful dodgems

One of the quirks of wealth management is that there's always some oddball or shady type trying to flog a fancy new investment idea. An area that seemed to be the pitch du jour in recent times was the concept of the art fund.

In a nutshell, you invest with a fund manager with excellent taste and market knowledge to buy fine works of art and sell them on to some naive buyer. You get nice returns, low correlation with other asset classes (I know, who would be nutty enough believe in that idea?) in exchange for the usual 2/20 fees for private funds.

In many cases, particularly in London, the people buying had no concept of taste or value - this was showing off, pure and simple. Anyway, the game seems to be up. I can't claim to have predicted the art market would go into a severe reverse gear, but it never was an asset class.

My advice to clients (suitably refined and smoothed by marketing) was simple: if you like art, find an antique dealer you like and get him to buy you a few pieces. If the price moved up, great - but at worst you were left with a work of art you'd be happy to have in your home. Not that bad really.

The lesson extends to a lot of "fad" asset classes (coins, stamps, wine to name a few). People should not confuse hobbies or interests with investments, least of all advisers with a fiduciary duty to their clients. Putting serious money to work in a hobby is a one-way ticket to mayhem.