Wall Street Lends Its Style to Artists In Need of Funds

Both Auchincloss and Ross said they have received many inquiries about setting up similar trusts for other freelance fields. They said that as long as the discipline produces work that can increase in value over time and the process used to select participants is rigorous, the concept should translate to other media, including photography.

Julie Ward, an independent curator working on a book about patronage, described Louden's approach as a postmodern spin on a process that dates at least to the Medici family's support for the arts in 15th- and 16th-century Florence.

She said the multiple-investor approach could remove some potential drawbacks of more traditional patronage, in which an artist can become beholden to the tastes and whims of a single wealthy collector while having little control over the art's fate.

"Positive patronage creates good energy, good back and forth, between the artist, the patrons and the audience," she said. "As we went through the 20th century, patronage became more a matter of, 'I'll give you money, then I own [the work].' It got out of sync."

James McLaren, an investment banker who put money into "The Attenders," said he was attracted by the structure of the deal: If the piece had failed to sell, each investor would have received part of the sculpture, which could easily be broken into pieces. But he said the real reason he put up money was the thrill of helping an artist.

"To me there is a lot of psychic pleasure in trying to identify and support people who are in the earlier stages of their career," he said.

Louden said many of her investors had a similar reaction, at least in part because she began raising money not long after the Sept. 11, 2001, terrorist attack on the World Trade Center. The attack drove Louden and her husband out of their apartment in Lower Manhattan for two weeks and shuttered Louden's studio.

"I think after 9/11 it made people feel better to be involved in a project like this," she said. "People have mostly recovered from that time, but they still want [to invest] because of that creative feeling."

While Louden's approach appears fairly novel, the practice of "securitizing" art is not new. One of the most famous examples is the "Bowie Bond."

In 1997, pop star David Bowie considered selling his extensive catalog of previous albums. But with help from manager William Zysblat and financier David Pullman, Bowie decided instead to sell bonds backed by future revenue from his songs. The bond sale raised $55 million for Bowie and allowed him to retain control of his work.

Zysblat said that while the idea seemed exotic at the time, it was actually quite simple. Bowie's catalog had demonstrated consistent sales and predictable annual earnings, making the bonds a fairly low-risk investment. Bowie bonds carry a 7.9 percent interest rate and have never missed a payment. They are owned entirely by Prudential Insurance Co. and not publicly traded.

Pullman said that since 1997 he has successfully sold bonds backed by royalties from songs in the catalogs of Motown Records, James Brown, Ashford & Simpson and the Isley Brothers.

And the phenomenon could soon move beyond big bond sales designed for institutional investors. New York financier Robert D'Loren, who along with Pullman has arranged for companies to sell bonds backed by intellectual property, is preparing to sell stock to the public that will pay dividends based on royalties on such diverse things as song lyrics and hamburger recipes.