“The world lacks regulation of art securitization and art funds. With an exception of perhaps only India no country of any significant domestic investment market has a well defined regulatory framework for art funds… Well, as of this summer Russia not only has this framework but it already has the first pilot art securitization project on the way.

Leader, a powerful local asset management firm controlled by Putin loyalists, launched two closed end art funds on August 27 and is expected to complete subscriptions by the end of November. Skate’s has learned that once initial subscription period is over, Leader’s larger art fund (called “Sobranie” that can be translated both as “collection” and “meeting”) can raise anywhere between RUR 2 and 6 billion (US$ 63 and $189 million) in assets, and significant portion of those are expected to be large collections contributed to the fund in exchange for the fund units.”

In other words, this is an art fund which powerful Russians buy into by handing over art rather than cash. The valuation of that art will be set by the fund, not the market — and of course if you’re a friend of the managers you might expect to get a particularly attractive valuation. Essentially, you swap full ownership of one big illiquid asset into partial ownership of a large pool of assets.

On the other hand, if you’re not a Russian friend of the managers, and instead are just investing cash, then there’s a real chance that you’ll be overpaying systematically for everything the fund acquires, and there’s always the risk that you’ll be massively diluted at any time. And that shiny new regulatory framework? Will be useless, if and when you come to need it.

Meanwhile, Bill Cohan says that he wants art galleries to be regulated by — wait for it — the Consumer Financial Protection Bureau:

Even if buying art is a rich man’s sport, there is still a need for some serious introspection among those who buy and sell art about putting an end to the questionable behavior of some dealers. And if that means that the art market needs to fall under the purview of the Federal Reserve at the newly created Bureau of Consumer Financial Protection — which of course no one in the art market will like — then so be it.