Felix Salmon links to this essay which argues that the contemporary art bubble was a classic bubble that's about to pop.
Many hedge fund managers and other money managers participated in this mania. In my amateur psychologist opinion (and getting a sense of the psychology of a money manager is part of the art of money manager selection, no pun intended), a mindset that would participate in this bubble is incompatible with the mindset favorable to long-term investment success. Anyone who bought this kind of art "as an investment" can be dismissed out of hand--they are speculators pure and simple. Speculation is not evil but should not be confused with investing. But even those who bought such art as a status symbol--a motivation I can understand--should be questioned, because the status to be gained from owning such symbols would only last as long as the bubble itself, which is to say not that long. Spending two million dollars to get two year's worth of coolness is an expensive way to impress a woman. Compare this to the 19th century American robber barons who amassed collections of European Old Masters from impoverished continental aristocrats via such dealers as Joseph Duveen: not only did the scarcity value of such works help them hold their value, but the status derived from owning them has endured as well. Now their descendants are called aristocrats and are admired for their taste.
So add this to the due diligence questionnaire: If your potential money manager participated in the tulip mania of our day (and it's not difficult to find this out, as they made themselves known), be wary.
Update: Now for the exceptions--Oh dear, there are a lot of them. I may have to take this post back:
In The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art, author Don Thompson produces a list of the world's top active collectors of contemporary art. It includes a number of people whose records of long-term capital allocation success would shame most hedge fund managers, such as Bernard Arnault, Eli Broad, Joseph Lewis, George Lindemann, Francois Pinault, Charles Schwab, and Steve Wynn. Also mentioned in the book is David Geffen.
In my defense though, contemporary art as a whole is not the same thing as the contemporary art bubble. The former includes many artists and collectors born before WWII, while the latter refers to a more recent phenomenon of the past few years that focused on the work of the more prolific living artists. I'd be interested to know how many of the above list of exceptions were net sellers of art during the bubble, or who declined to buy what everyone else went crazy for.