Want to Own a Picasso? Here's Your Chance

Let's face it: The investment options available to ordinary investors right now aren't exactly exciting. But, as investors have lost confidence in traditional instruments like stocks and bonds, the rich have flocked to the world of rare collectibles.

Of course, there aren't many people who can afford to put down $100 million for a fine piece of art. But soon, you won't have to be a billionaire to be able to afford a stab at claiming your share of profits from rising prices on art and other rarities.

Investing in High-Priced Toys

Wall Street has been catering to rich investors with money to burn and a desire to diversify their portfolios. As an article in the New York Post recently reported, a variety of specialty hedge funds have come out in recent years, allowing rich investors to try to earn profits in everything from works of art to wine to vintage automobiles. And with wine funds in particular seeing returns of 30% and up, demand to get in on the action has never been hotter.

But hedge funds require high net worth and huge initial investments. That's enough to lock out most would-be investors.

Your Gateway to Riches?

One company wants to change that, however. Within the next year to 18 months, the Liquid Rarity Exchange plans to offer what it's calling Liquid Rarity Funds, which will focus on rare collectibles that have good track records of offering high and sustainable returns.

The list of assets that the company may eventually offer is quite extensive, going beyond art and wine. You'll be able to invest in autographs, rare books, and even intellectual property rights to films, photographs, and music.

Overcoming Obstacles

Liquid Rarity Exchange still needs to deal with some challenges. Public funds registered with the SEC will need to be able to value their assets on a regular basis. Yet establishing ongoing valuations for illiquid collectibles (like works of art) to the SEC's satisfaction may prove difficult.

Read the Vogel Investing Rules and Take a Peek at Their Collection
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Want to Own a Picasso? Here's Your Chance

Even though they never sold their collection, the Vogels followed a classic investment strategy: Instead of going for a quick profit, they purchased art with the intention of keeping it for the long term. In Herb and Dorothy, a 2008 film about the pair, Dorothy Vogel acknowledged that the art she and Herb collected was hard to appreciate: "These things you have to live with. The more you live with it, the more you see it, it grows on you. It's something that you don't like right at first."

Talking about her buying strategy, Dorothy Vogel later recounted, "We had no restrictions on what we bought. We just bought what we liked." Laura Paulson, deputy chairman for the Americas at Christie's auction house, suggests that this cuts to the heart of the Vogels' success. "They were divorced from any sense of monetary value," she argues. "They wanted to connect, to be part of something."

In this regard, the Vogels' art purchases seem very different from the quick buy-and-sell strategy of most stock pickers. "Not every stock you buy will be a great pick," Paulson notes. For the Vogels, the key consideration wasn't the short-term cost of their art but the value that it added to their lives -- a value that bore considerable long-term fruit.

PHOTO: Herb and Dorothy inside their Manhattan apartment

For shrewd investors, knowledge can be as important as capital. That was certainly the case with the Vogels, who were intimately aware of the movements and trends of the art market. As Dorothy Vogel recounted, "We came home from work and ... we went to a gallery opening or we went to a studio. We went out every night."

In the process, they became aware of most of the cutting-edge artists in New York City. "They really embedded themselves in the art world," Paulson says.

That close analysis was a big part of the Vogels' buying strategy. Given their limited funds, the pair had to be extremely savvy. "Their buys had to be significant," Paulson notes. "Every purchase represented an extraordinary investment of time and energy."

Among investors, the search for undiscovered market opportunities -- "blue-water investments" -- is a constant preoccupation. The Vogels demonstrated its applicability in the art world with their determination to find the most cutting-edge artists. Originally, that was a function of their finances: In the 1960s, when the pair started collecting, minimalist art was only beginning to emerge and was largely ignored by the collecting public. "They focused on what they could afford," says Paulson.

When minimalist art caught the public eye and went up in value, the Vogels progressed to new artists and innovations, which enabled them to stay ahead of the curve -- and maximize the impact of their modest funds. It also didn't hurt that the art they chose to collect, "tough art," as Herb Vogel called it, took a long time to catch on.

When it comes to researching an investment, data analysis can only take an investor so far. The next step -- actually visiting the company and getting to know its employees -- can reveal depths of information that would otherwise be unavailable.

Not surprisingly, the Vogels often visited studios. In fact, as artist Lucio Pozzi later recalled, "The two first people who came to my studio were the Vogels. They offered to buy some pieces and I was happy. It was probably one of the sole sales in my first six months or something!" The Vogels' interest in Pozzi's art -- and willingness to meet with him on his home turf -- formed the basis of a lasting relationship.

Not only did their studio visits give the Vogels an opportunity to buy art at lower prices, but it also gave them a unique insight into the next step in each artist's evolution long before it hit the market.

In business, it's hard to overestimate the simple power of a handshake or a face-to-face conversation. In this regard, the Vogels were masters: Over their decades of collecting, the pair built close relationships with hundreds of artists and art world professionals. Ultimately, these relationships bore fruit with a host of unique opportunities.

A good example of this is the pair's friendship with Christo and Jeanne-Claude, two artists who became famous for their huge environmental installations. When they met the pair, the Vogels quickly realized that they couldn't afford any of Christo's art. However, when Jeanne-Claude later needed a pet sitter, she offered the Vogels a free piece of art. "Herbie said, 'No, no, no, we don't want it free," she later recalled "And I said, well it's not exactly free..." In return for watching the pair's cat for a summer, the Vogels got a collage of the Valley Curtain, one of Christo's most famous works.

PHOTO: Herb and Dorothy at a Richard Tuttle art opening.

Many investors buy stocks of companies that they love -- choices that may not always pay off. That was certainly true of the Vogels. "The Vogels were always very loyal about the art they bought," Paulson notes. "But as a collector, it's better to be discerning. Getting a representative history of the artist's development doesn't necessarily help increase the overall value of a collection."

Even so, the Vogels' devotion to their favorite artists underlay their relationships and helps to explain how the pair were able to continue buying works even after those artists became firmly established. Many artists were flattered by the early attention: As artist James Siena later recounted, "What distinguished them from other collectors on one level was that they really wanted to see everything ... It almost started to seem as though I was talking to curators rather than collectors."

PHOTO: The artist Christo and his wife Jeanne-Claude (back) pose with collectors Dorothy and Herbert Vogel as they visit the National Gallery of Art for the exhibition "Christo and Jeanne-Claude in the Vogel Collection."

Stephen Antonakos
University Museum, Southern Illinois University

The Dorothy and Herbert Vogel Collection

Daryl Trivieri

Painting: acrylic on canvas
68 1/2 x 68 inches
Date: 1985
The Dorothy and Herbert Vogel Collection

Daryl Trivieri

Painting: acrylic on canvas
10.125 H X 14 W X 0.5 D
Date: 1989
The Dorothy and Herbert Vogel Collection

Lynda Benglis

Sculpture: Plaster, bronze, wire mesh, gesso, lacquer, gold leaf
21 x 6 x 3 3/4 in.
Date: 1969
The Dorothy and Herbert Vogel Collection

Don Hazlitt

Collage: Oil and canvas collage on board
Date: 1988

Gift of the Dorothy and Herbert Vogel Collection: Fifty Works for Fifty States, a joint initiative of the Trustees of the Dorothy and Herbert Vogel Collection and the National Gallery of Art, with generous support of the National Endowment for the Arts and the Institute of Museum and Library Services

The Dorothy and Herbert Vogel Collection

Joe Andoe

Painting: lacquered acrylic on paper
9 1/2 x 6 1/2 in.
Date: n.d.
The Dorothy and Herbert Vogel Collection: Fifty Works for Fifty States is a joint initiative of the Trustees of the Dorothy and Herbert Vogel Collection and the National Gallery of Art, with the generous support of the National Endowment for the Arts and the Institute of Museum and Library Services.
The Dorothy and Herbert Vogel Collection

Cheryl Laemmle

Painting: oil on canvas
30 1/4 x 40 1/8 in.
Date: 1988
The Dorothy and Herbert Vogel Collection

Will Barnet

Drawing: graphite and charcoal on vellum tracing paper
29 15/16 x 42 in. (irregular)
Date: 1977
The Dorothy and Herbert Vogel Collection

Mark Kostabi

Ink on paper
12 x 9"
Date: N.D.
The Dorothy and Herbert Vogel Collection

Claudia de Monte

Paper mache (celluclay), acrylic, glitter
Date: 1980

Gift of the Dorothy and Herbert Vogel Collection: Fifty Works for Fifty States, a joint initiative of the Trustees of the Dorothy and Herbert Vogel Collection and the National Gallery of Art, with generous support of the National Endowment for the Arts and the Institute of Museum and Library Services

The Dorothy and Herbert Vogel Collection

Daryl Trivieri

Drawing: charcoal on paper
22 1/2 x 30 3/16 inches
Date: 1988
The Dorothy and Herbert Vogel Collection

“Most of us go through the world, never seeing anything. Then you meet somebody like Herb and Dorothy, who have eyes that see.” -- Richard Tuttle, artist

Watch the trailer to Herb & Dorothy (available below).  Herb & Dorothy tells the extraordinary tale of a seemingly ordinary couple who filled their humble one-bedroom New York apartment with more than 4,000 works of art over a 45-year period. Filmmaker Megumi Sasaki turns her lens on the Vogels during a critical period of transition for the couple and their cherished collection.

The benefit to investors, though, will be that SEC oversight will give them valuable information about how the funds operate and what they hold. The resulting transparency will take away some of the dangers that analysts have pointed out about hedge funds specializing in collectibles.

So if you've ever wanted to own a Picasso, you may soon have your chance. You won't get to hang it in your living room, but if the art market holds up, your wallet could enjoy some of the benefits.

Motley Fool contributor Dan Caplinger is a huge fan of Peter Max lithographs. You can follow him on Twitter @DanCaplinger.
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