Visual art is a crucial component of society’s mental health and a source of joy and beauty to all. Art is comforting to society as a way to step back from our chaotic daily lives and marvel at the delicacy of the paint on the canvas or ponder what life was like for the artist in the act of painting. While museums and galleries can be sufficient for people to soak in their love of art, investors have found a new way to indulge their passion for art while making a profit.
Though physical art investment has been around for quite some time, with auction houses such as Christie’s and Sotheby’s running high-end art auctions for ownership of whole pieces, there’s now a new way to invest in the art market. Fractional ownership of art has become a popular way to invest.
Investing through physical ownership of an entire piece, an art fund, or trading shares on the newly regulated art market can be a wise financial investment. The art market’s value is not tied to the stock market, and art tends to hold its value over time while other markets fluctuate, such as during the 2020 pandemic. According to Masterworks, during the highest inflation rate we’ve seen in 40 years, contemporary art prices appreciated by 13.5%.
Art investments also attract investors who want to create a diversified portfolio. Because art is not highly correlated with the stock or bond market, it’s the type of investment that helps minimize risk while adding interest. According to Mintus, 42% of wealthy investors include art in their portfolios.
While any art investment could be advantageous, fractional ownership has become highly popular in democratizing the market.
Art Tactic writes that “the fractional ownership model we see today is simply an extension of the same desire to democratic access to the art market, and the opportunity for the art market to tap into a new type of client base.” This model refers to a single company or art fund purchasing a piece of art it believes to be valuable and fractionalizing it into shares that investors can buy and trade or hold onto until the entire piece is sold. This model allows investors to partially own works of iconic art without purchasing the whole piece, worrying about maintaining it, and finding an appraiser and buyer once ready to sell. While some say the emotional component of owning artwork is lost when only holding a share of a piece, it means the investment behavior will more likely mimic that of traditional investments, making the process slightly more predictable.
Multiple fractional ownership companies offer investments at different price points and fees. Starting at the high end, MasterWorks is an online investment platform that offers contemporary blue-chip pieces for a minimum investment of $15,000. MasterWorks is the current market leader and is valued at over $500 million. The company filters quality work at an impressive standard and purchases less than 5 percent of what it is offered. Through a private equity fund, MasterWorks securitizes artwork by filing with the SEC and then offering shares to investors who can either trade their shares on the secondary market or wait until the painting is sold to receive returns.
Other fractional ownership investment platforms include the California-based aShareX and the British Mintus. Both have a similar price range, with bids starting at $3,000 (Mintus) and $5,000 (aShareX). Both also share the same private equity fund model as MasterWorks, but aShareX also allows you to bid for full ownership of a piece.
A new fractional ownership platform with a different approach popped up in 2020. Instead of utilizing a fund structure, Artex is a regulated Art Stock Exchange platform that offers fractional bids starting at $100 for works sold by private collectors and offered through an IPO. These shares are then traded on the Artex Exchange, regulated by the Financial Market Authority in Lichtenstein, and the pieces are displayed in museums instead of traditional storage houses. Artex is the most recent player in democratizing the art market and the most accessible to beginning collectors and art lovers.
As the concept of fractional art shares is new, you may be hesitant to invest. Still, a report by the Hiscox Online Art Trade in 2023 showed that “while only 9% of art buyers surveyed have invested in a share of artwork in the past 12 months, 61% said they were likely to do so in the next 12 months,” proving this is a growing trend and, possibly, an inflation hedge and lucrative investment for those with a long-term view and passion for art.