Art World Draws Scores of Investors Amid Pandemic
NEW YORK • New offerings kept coming in recent months: Banksy, George Condo, Zao Wou-Ki.
A New York start-up that allows investors to buy a tiny stake in paintings by world-class artists for just US$20 (S$27) has seen a surge in demand during the pandemic, according to its founder, and it has bought 15 artworks since the onset of Covid-19 to feed their appetite.
A recent US$1.52 million initial public offering of a piece by the American graffiti artist Kaws sold out in a few hours.
"People feel that equity markets are overvalued and they are looking for other places to put money," said collector Scott Lynn, who started the company, Masterworks, in 2017.
Masterworks is at the forefront of a burgeoning niche in fractional ownership in luxury assets such as fine art, collectables, vintage cars and even racehorses such as Authentic, the winner of this year's Kentucky Derby last Saturday.
The start-ups offer the shares as an affordable way to invest in expensive, rarefied fields that are typically available only to the mega-rich.
Think of it as the art market's version of the popular trading platform Robinhood Markets, which lets users buy a fraction of a company's share for a few dollars. It mirrors the democratisation movement unfolding in the stock market - except that the assets are inherently more risky and lacking of a track record.
Auctions are filled with casualties, and even works by star artists can implode once prices get overheated.
The concept of fractional ownership is not new in the art market - or for thoroughbreds. It is a buyer-beware investment: Robinhood itself is under pressure after complaints from novice investors and is facing a United States regulatory probe.
But the pandemic has heightened the taste for those risky bets.
It is about the experience and the excitement of owning a part of something unique - even as many will likely take a loss.
"Folks are stuck in the house, bored, and, if they're lucky enough to be working, aren't spending money on things they normally would," said Bloomberg Intelligence analyst David Ritter. "So, they have money to play with."
Mr James Scollick, 40, an avid user of Robinhood from Los Angeles, discovered Masterworks on Instagram in July and invested US$10,000 two weeks later.
Half of that went into buying shares of a Condo painting and the rest into secondary-market shares for Banksy's "Mona Lisa".
"It felt like a natural way to invest some of my money," he said.
Masterworks has been drawing about 10,000 new users a month during the pandemic, Mr Lynn said, and it is not alone.
Acquicent, a company founded last year to develop a trading platform for fractional-share owners of classic cars, saw an 80 per cent jump in the number of potential investors in the past three months, according to founder and chief executive Anthony Citrano. "It's an asset class that 99.9 per cent of people could not touch ordinarily," he said.
"As far as people interested in investing, it's very hot right now."
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