The $65 billion-plus fine art market hasn't been an easy one to penetrate for those who aren't uber-wealthy. The "fractionalisation" trend might change that. We talk to a firm in the space.
Owning fine art can be costly, but in the inventive financial
sphere there is a way to tap into possible investment gains,
enjoy the art and show it off.
The idea of “fractional” ownership is already established in areas such as forms of property and private jets. A new UK firm, Mintus, which was launched this year, says it offers a new route to owning art without breaking the bank. WealthBriefing recently spoke to Tamer Ozmen, its founder and CEO.
The firm said it opens up the annual $65 billion art market to investors. Clients buy shares in a UK fund set up solely to own and manage the artworks. Paintings by Andy Warhol and George Condo are now on sale in the platform; Mintus has a $150 million pipeline of artworks in 2022 to 2023.
“Fractional ownership is a means to gain access to a market with upward momentum and attractive characteristics (low correlation to traditional investments; inflation hedging) that is traditionally difficult to get into as it requires large amounts of capital, developed relationships, and specialist knowledge,” Ozmen said.
“Social cachet definitely also comes into it – owning part of a Warhol is a social benefit for investors,” he continued. Mintus hopes its business model can give clients a ride on a rising escalator.
The contemporary art market has outperformed the S&P 500 Index by 240 per cent since 1986. Advocates for fine art say that in an increasingly inflationary environment, it can help improve the risk-adjusted returns of a portfolio.
The former CEO of Sotheby’s, Tad Smith, has invested in Mintus, as has the former chairman of Christie’s, Brett Gorvy.
Private banks and other advisory firms like the art market. While small compared with the US equity market, for instance – estimated at more than $30 trillion – the art market’s size at around $65 billion is not to be sneezed at. Organisations such as UBS, Citi Private Bank and Deutsche Bank, for example, advise wealthy individuals. A London-based firm (see interview here) is Hottinger Group. In the US, examples include Ronald Varney Fine Art Advisors.
Talk of "fractionalisation" should not be conflated with non-fungible tokens. Each NFT is a unique token on a blockchain which stores information about provenance that can be traced back to the original issuer; therefore it provides collectors with the opportunity of building a digital collection. For this reason, NFTs are popular in applications which require unique digital items, including crypto art, digital collectables and online gaming, where some guarantee of authenticity and ownership history add value.
So how does Mintus work?
The Mintus entity that holds the artwork(s), and in which platform investors would invest, are segregated portfolios of a Cayman Islands company, Ozmen said.
“For larger investors who are looking to diversify their investment in art we offer either a Luxembourg investment vehicle, AMC (Actively Managed Certificate), (most suitable for European banks and wealth managers) or a Cayman Islands investment vehicle. Both of these vehicles will invest in each artwork offered on the platform,” he said.
The minimum investment is $3,000 per painting and there is no maximum. All investors receive a certificate of investment indicating the value of their initial investment and the painting they have invested in. Artworks will be sold at auction or by private sale when they have reached optimal value. After the sale, profits, minus fees, will be distributed to investors. Mintus will also operate a secondary market for investors in permitted locations.
For many individuals, getting into the fine art space has been difficult – and Mintus is trying to fix that, Ozmen said.
“Mintus tries to offer best value for the best artwork by sharing its earnings from the platform with collectors and artists who supply the artwork,” he said. “Secondly, the art investment committee has some of the most respected people from the art world and Mintus conducts a thorough quantitative and qualitative analysis and also does exit planning before syndicating a painting,” he continued.
The value of all the transactions in the art market in 2021 was $65.1 billion. The total estimated value of art in the world (in both private as well as public – such as museums) is $1.7 trillion.