The Spending Habits of Hedgies November 9, 2006, 6:09 am
As the art market boils over this year — Wednesday night, Christie’s oversaw a record-setting $491 million sale that included works by Gauguin and Klimt — it is fair to say that hedge fund managers are adding some of the heat. Consider SAC Capital’s Steven A. Cohen, who recently agreed to drop $63.5 million for a Willem de Kooning painting owned by the entertainment mogul David Geffen. Kenneth Griffin, who leads hedge fund Citadel Investment Group, snapped up another painting from Mr. Geffen for $80 million inflatable pool slides.
A new survey of hedge fund professionals, who are a generally secretive group, suggests they are juicing not just the art market, but those for other goods as well. For his book Fortune’s Fortress: A Primer on Wealth Preservation for Hedge Fund Professionals, Russ Alan Prince of the consulting firm Prince & Associates, working in conjunction with trade publisher MARHedge, polled the buying habits of 294 managers with a median net worth of $61.7 million.
The book is not out yet, but MARHedge shared some of the survey’s findings with DealBook. The average respondent reported spending nearly $4 million on fine art last year, which means that among the survey participants alone, more than $1.1 billion of hedge-fund money poured into the art market.
Given the reputation of many hedge-fund professionals as big technology fans, it may be suprising that electronics were so low on the hedgie shopping list. In fact, facials seem to have outranked plasma TV’s, as average spending on “traditional spa services” was higher than the “electronics” category.
The survey’s findings for their 2005 personal average spending:
Fine art: $3.99 million
Yacht charters: $429,700
Hotels & resorts: $304,900
Fashion and accessories: $204,200
Traditional spa services: $124,000
Entertaining friends: $76,700
Wine & spirits for the home: $48,900
What’s driving the spending? Says Mindy Rosenthal, MARHedge’s conference editorial director: “It’s no surprise that hedge fund managers shop the same way they work — without restraint.”