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?
In case you don’t know, 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 that typically have an unifying theme. Popular ETFs include large-cap stocks, growth stocks, and dividend stocks. When you purchase an ETF, you split your investment across a wide range of stocks, taking a small ownership position in each.
Knowing this, when asked about an art ETF, I believe they want to know if there is some investment product where you can split your funds over many artworks, and taking ownership of fractional shares of million dollar artwork.
While no art ETF like this exists on any major stock exchange, I’ve identified 3 substitutes that could give you a similar kind of exposure.
Option #1. Invest with Art Funds
Of the two, Yieldstreet is probably closest to a pure art ETF because it lets you diversify across many artworks with one investment. 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. This Fund has a minimum investment requirement of $10,000. 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 offers the option to invest in single artworks and does not offer a bundle package like Yieldstreet (unless you follow these instructions). Otherwise, you can simulate an art ETF by investing across the numerous artworks that are on the Masterworks’ platform. You could invest across every artwork, according to a theme, such as post-war or contemporary art, or in a way that spreads your risk across numerous artists/styles/periods. In a way this offers more freedom to the investor than Yieldstreet.
In some ways, Yieldstreet’s art funds could be considered better if you are looking for a completely hands-free art ETF substitute. However, at the moment Yieldstreet is only accepting high-net worth Investors. So if you not an accredited investor, Masterworks might be best for you. Masterworks has a lower investment minimum than Yieldstreet, starting from about US$2,000. But, bear in mind, that US$5,000 is an amount needed to be sure to help you skip the waiting list.
Option #2. Invest in Companies with Art Collections
When you buy a stock in a company, you buy a small ownership stake in the company and all its assets. 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
Option #3. Invest in the Owners of Art Funds
Rather than outright investing in art via art funds, 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:
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 Small Issue with Art ETF Substitutes
My major issue with these art ETF substitutes is that they are one, two, or three steps removed from having complete control your portfolio. Yieldstreet and Masterworks are an exception to this problem, but they are not for everyone. For me, like I mentioned above, they can be a let down from a pure art collecting perspective. But if you are after a hands-off and relatively risk-free experience, they can take care of the heavy lifting.
- 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?
There is no wrong answers here, but answering these questions should help you determine if you want to start looking at affordable editions from blue-chip artists, or if you want to invest in an art ETF substitute.
We welcome you to Contact Us with any questions you have about investing in art. Let us know your budget, the kinds of art that interest you, and we can work out a plan to get you started with art collecting the right way.