A common question I receive is whether there is the option to invest in an art ETF. The short answer is… no. But there are a few alternatives that could act similar to an art ETF.
Firstly: What is an ETF?
ETF stands for Exchange Traded Fund and is an investment product you can buy and sell via a stock exchange. Essentially, it is a fund comprised of a group of stocks or other assets that typically have an underlying theme. Popular ETFs include funds comprised of high dividend-yielding stocks or high growth-potential stocks. When you purchase an ETF, you split your investment across a wide range of assets, taking a small ownership position in each.
Knowing this, when asked about an art ETF, I presume that the enquirer wants to know if there is some investment product where your funds get split over many artworks, helping them diversify risk, but also, giving them access to fractional shares of high-dollar-value work.
While no art ETF example like this exists on any major stock exchange, there are 3 substitutes that could give you a similar kind of exposure.
#1. Art funds
Art funds are probably the closet you are going to get to a pure art ETF. Currently, there are two major art fund offerings: Yieldstreet and Masterworks.
Of the two, Yieldstreet’s offering is closest to an ETF because its funds are diversified across many artworks. Take Yieldstreet’s Art Equity Fund IV for example, which is comprised of paintings from artists including Jean-Michel Basquiat, Damien Hirst, Edward Ruscha, and Lucio Fontana, among others. Like a stock ETF, Yieldstreet actively monitors the performance of the artworks in the fund and will adjust as needed in an attempt to minimize risk and maximize returns to investors.
Meanwhile, Masterworks only offers the option to invest in individual artworks and do not offer a bundle package like Yieldstreet. But you can simulate an art ETF by investing across the various artworks they offer. You could invest across every artwork or according to a theme, such as only choosing post-war or contemporary art. Where this simulation falls short is that it is harder to manage your investment as a whole and judge its full return potential. In my opinion, Yieldstreet’s art funds are superior if you are looking for an art ETF substitute.
#2. Invest in companies with art collections
When you buy a stock in a company, you buy a small ownership stake in the company. As such, a cunning option exists to purchase stock in publicly listed companies that are known to have art collections. The following is a list of companies that fit this criteria. Although you should bear in mind that a company’s art collection will typically be a minor asset on their books compared to their other assets, and buying their stock won’t give you physical access to any of the artworks. Therefore, ultimately, this option is a bit disappointing from an art investing perspective.
- UBS Group (SWX: UBSG) – a collection of more than 35,000 artworks
- JPMorgan Chase (NYSE: JPM) – a collection of more than 30,000 artworks
- Bank of America (NYSE: BAC) – a collection of ~60,000 artworks
- Microsoft (NASDAQ: MSFT) – a collection of ~5,000 artworks
- Deutsche Bank (ETR: DBK) – a collection of ~60,000 artworks
#3. Invest in the owners of art funds
Rather than outright investing in art via Yieldstreet or Masterworks, you can also invest in the companies that own Yieldstreet and Masterworks. While we are moving further away from directly investing in art, this option still exposes you to art as an investment. As private companies, you cannot simply purchase a direct stake in Yieldstreet and Masterworks. But some part owners of these platforms are venture capitalists that offer investment funds or are publicly listed.
Part owners of Masterworks include:
- Left Lane Capital – offers investment funds
- Galaxy Digital (TSE: GLXY) – publicly listed
Part owners of Yieldstreet include:
- Kingfisher Capital – offers investment funds
- Raymond James Financial (NYSE: RJFO) – publicly listed
- Gaingels – offers investment funds
- Greenspring Associates – offers investment funds
The problem with art ETFs
My major issue with these art ETF substitutes is that they are one, two, or three steps removed from having complete control your portfolio. While, some collectors prefer the hands-off approach to investing that places like Yieldstreet and Masterworks offer, it is not for everyone. For me, like I mentioned above, they can be a bit disappointing from a pure art collecting perspective.
- Would you prefer to outright own an affordable artwork that you can have in your home, and that you can sell when you choose?
- Or would you rather own a small share of a much more expensive artwork that you never get to see in real life, and that you are entrusting to the custodianship of another entity?
There is no wrong answers here, but answering this question should help you determine if you want to start looking at affordable editions from blue-chip and established artists, or if you want to invest in an art ETF substitute.
Untitled 1, 2011
Xerox print, Signed
Limited edition of 50
Fast Train to Shitsville,
Silkscreen print, Framed
Limited edition of 125
Kashi Sunrise Lotusa, 2020,
Limited edition of 150