Owning a Monet, a Picasso, or a Hirst painting is a barometer of wealth, one that’s unattainable for most art enthusiasts. Blue-chip artwork is usually priced in the millions, and even if you have that kind of cash on hand, unless you have the right connections with art dealers, auction houses, and galleries, you might not even be able to participate in the sale.
Paintings and other art items are also illiquid, which is another barrier for people who might need to be able to access their savings in a hurry. But fractional ownership is a game-changer. It involves dividing the ownership of an artwork into smaller shares that can be purchased by multiple investors.
This model, which was pioneered in the blue-chip art world by a platform and app called Masterworks, significantly lowers the investment size required, allowing individuals with smaller budgets to participate in the market. Fractional investing platforms also provide secondary markets, where investors can buy and sell their shares, which improves the liquidity of the investment.
It’s true that a fractional investment in a Banksy isn’t the same as having the painting hanging on your wall. But for the majority of art enthusiasts who can’t afford that option, fractional art investment platforms make it possible to enjoy the thrill of ownership, and to convert your enthusiasm and knowledge into a non-volatile, non-market correlated asset.
The contemporary art market has seen an average annual return of 14.1% over the past 26 years, which far surpasses the S&P 500, making it appealing also for investors who might have less love for art, but do want to hedge their portfolio against market downturns. So it’s not surprising that the popularity of fractional art investing is rising. According to art market research firm ArtTactic, more than $625 million worth of art has been sold through fractional investments since 2017.
Today, a number of different fractional art investment platforms are available, each with different regional markets, niche specialties and financial models. Here are some of the possibilities for fractional art investing.
Masterworks: own shares in your favourite painting
Masterworks invites art enthusiasts to buy units in individual paintings, focusing on contemporary artists. The organization purchases artworks that its experts deem most likely to appreciate in value, and it registers each new acquisition with the Securities and Exchange Commission (SEC) to convert it into a qualified investment. This way, users can buy a share in a dedicated LLC set up for each work of art and effectively own a share of the painting.
Masterworks holds onto its paintings for 3-10 years, depending on market performance, before selling them at auction. Once the painting is sold, each person who owns a share in the art receives a commensurate share of the profits from the sale.
Shares are often priced at $20, but you’ll need a minimum investment amount of $10,000 to join the platform. Whenever you log in, you’ll see a list of available artworks. If shares in your favourite item have all been sold already, keep an eye on Masterworks’ secondary marketplace, where people trade their shares.
YieldStreet: buy into themed art funds
YieldStreet takes a different approach to Masterworks, because instead of buying shares in specific paintings, you’ll buy shares in a portfolio of numerous paintings.
You can choose the art class, like blue-chip masterpieces, new talent, or mid-career artists. For example, one fund focused on post-war and contemporary artists, and another on Harlem Renaissance artists.
Each fund has different terms, minimum investment requirements, and payment schedules, with some paying regular dividends and others giving a lump sum when the fund matures. Most funds have a five-year term, and there’s no secondary marketplace for trading shares, so you’ll need to be willing to commit. YieldStreet’s minimum investment amount is also $10,000.
ARTSPLIT: hang your fractional investment on your wall
ARTSPLIT presents yet another option for fractional art investing. It focuses on unique African art, and it’s up to you to manage your investment. The platform identifies paintings created by up and coming African artists, appraises each piece, and then divides it into 100,000 units.
The platform has both a primary market, where the platform offers shares (called splits) in different artworks, and a secondary market where ARTSPLIT investors can trade their splits. ARTSPLIT’s primary market is similar to an online art auction, because you’ll specify a maximum value that you’re willing to bid for the splits you want. When the auction closes, you’ll find out if your bid won.
Unlike other fractional art investment platforms, ARTSPLIT offers the opportunity for physical custody of your artwork. As well as buying shares in a painting, you can also bid for the lease contract, which means you can display the painting in your own home.
Artopolie: visit your painting in the world’s most famous art museums
Artopolie brings fractional investing to the most famous and iconic paintings in the world. Similarly to Masterworks, the platform turns each painting into a mini company, so that investors can buy shares in each one. But unlike Masterworks, Artopolie focuses on items that are hanging in famous museums and galleries and viewed by millions. Not surprisingly, there’s no option to hang these paintings on your wall at home.
With Artopolie, art lovers can own a share in a Da Vinci, a Picasso, or a Warhol. Just like with stocks, Artopolie users can trade their shares in different paintings to benefit when they rise in value, but they won’t benefit directly from the profits when “their” painting is sold.
Artoplie lets you invest while you’re still in the museum, by just scanning the artwork while using the app.
Fractional investing platforms open up blue-chip art
Fractional investing has democratised the world of blue-chip art ownership, making it a reality for millions of art enthusiasts all around the world. At the same time, it’s made it possible for retail investors to take part in alternative assets that were previously unattainable. Like all investments, fractional art investing can be a risky venture, but choosing the right platform for your preferences is the first step.