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Posted By: Jamie

It is conceivable that a hedge fund could invest in cards with a considerable amount of money, but it would be challenging. First off, due to the auction format, they would often find themselves bidding against collectors who will often pay considerably over market value for their card. This would make purchasing 1/1's and other esoteric items somewhat impractical.

Then if they went to sell that item, they would no longer be driving up the price of that very same card, causing them to lose money. This would limit their purchases to more mainstream high-grade cards with a worth of $50k+.

Another salient point to consider is that hedge funds I believe often have to report performance, and since a card is an individual collectible, it is considerably difficult to track value unless an actual sale is made. Though it is becoming more easier these days due to sites like VCP, etc., auction prices do vary considerably and hedge funds would have to risk not getting the return in value which they estimated to their investors and getting potential attacks of fraud.

This is not to say that a baseball card hedge fund could not happen. Certainly individual collectors have at times put massive amounts of money in, amounts that could be comparable to a small hedge fund.

Would I could see happening is a baseball card holding company that is publicly traded as an OTC (over-the-counter) penny stock. For instance, the company buys a mid-grade t206 Wagner for $1mn, then floats 100,000 shares at $10 a share. This would be incredible as it would give everyday people a chance to say that they own part of an Honus Wagner card.

Then if the company wants to purchase other cards, it floats 10,000 shares to give it an extra $100k and perhaps buy T206 PSA 9's of Johnson and Cobb, or whoever. As the value of the cards rise or fall, so does the share prices of the company stock. But then, what would be the motivation to create such a company? And the overhead of issuing shares and creating SEC filings would make it frustrating.

All in all, baseball cards can be great investment, but there is significant overhead. You need to pay the auction house 15-20%, and profits are taxed at general income. Storage costs, insurance, for a hedge fund paperwork and research experts, then the tediousness of late-night auctions bidding against fanatic collectors could create considerable overhead. Not to mention that most people who invest in baseball cards like to own the actual card, which as someone stated here, lessens it intrinsic worth for a hedge fund.

Many top collectors seem to like displaying their cards and sets, which is healthy for the promotion of their cards and the hobby. If a hedge fund buys cards and stashes them away for twenty years, it could be damaging to the hobby. Not that it won't necessarily happen, though. Interesting topic.

I do love cards, but yes, I do view them as an investment. I can't afford to overpay by 100% just for the "passion" of collecting.