Art Investment

Tokenised Art as Part of a Diversified Portfolio

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Written by
Marcelo García Casil

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19 February 2019

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It is a core credo of Maecenas that art - although created and appreciated for its beauty and its ability to convey questions and truths beyond the capability of words - should be thought of primarily as an asset class.

 Although it has its peculiarities, including the fact that each piece is unique and non-duplicable, it clearly offers economic benefits to those who are able to participate. Indeed, it is clear that people with the means to invest in art as it is traded today understand that it is first and foremost an investment. If it were not, why would nearly 80 percent of the world’s art currently be in storage, with much of it in purpose-made facilities in the tax-free transit zones of international airports?

In 2018, fine art overtook wine as the world’s top-performing luxury asset. Analyses show that since at least the 1990s, fine art has outperformed all other asset classes and major indices on an annual return basis. But unlike precious metals, REITs, or index funds, this particular asset class has remained outside the reach of all but the world’s wealthiest - who have used this access to make themselves even wealthier through art.

Maecenas, of course, changes the equation. Starting with last year’s successful tokenisation and sale of Warhol’s “Fourteen Small Electric Chairs”, we are greatly expanding access to fine art through tokenisation and the blockchain.

All of which invites the question: where does tokenised art sit within a diversified portfolio? Now that vastly more people are likely to have access to this outperforming market, how should they approach it? While the answer ultimately is specific to each individual’s circumstances, there are some best practices among experienced investors that may be taken to heart.

It is hard to estimate the specific allocation of fine art within large portfolios. For example, the endowments of Harvard and Yale Universities, which have pursued aggressive, active-manager strategies for some time, do not break out fine art as such. But their investment in the asset class is obvious to anyone who has visited their stately campuses. The same can be said of the ultra-wealthy individuals who make headlines every time they pay a new record for an old master.

So what’s the magic number? Surprise though it may be, there isn’t one. It is up to each individual, and depends on her particular circumstances and appetite for risk. One expert group recommends 2% of total assets be allocated to art and antiques. Clearly, any asset class must be an element in a larger, diversified portfolio.

But the key is that fine art clearly has an important role to play as a high-performing asset class within many more portfolios that it has to date. Tokenisation means - as Maecenas demonstrated with the Warhol auction - that people beyond the global super-rich can now enjoy the benefits of fine art as an asset class. That they had been unable to do so previously was a quirk of the historical growth of financial markets, as our CFO Eduardo Sarian explained here recently. Now that those barriers are gone, art is free to take its place in the diversified portfolios many more people.

 

Topics: Art Investment

Marcelo García Casil

Written by Marcelo García Casil

Founder and CEO of Maecenas. Having previously worked at a number of large global banks, Marcelo has wide-ranging experience in designing and building large-scale enterprise-grade systems with a focus on investment banking and financial solutions. An an entrepreneur, Marcelo has specialised in blockchain and financial technology, primarily in areas covering tokenisation of assets and new capital markets. His strong technical architecture and leadership skills have earned him the recognition and endorsement from amongst his clients, teammates and peers. Marcelo frequently speaks and presents at industry events, conducts specialised workshops and training sessions, and provides expert advice to companies.

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This blog post is illustrative and for informative and general education and discussion purposes only. It is not, and should not be regarded as “investment advice” or as a “recommendation” regarding a course of action, including without limitation as those terms are used in any applicable law or regulation. This information is provided with the understanding that with respect to the material provided herein (i) MAECENAS is not acting in a fiduciary or advisory capacity under any contract with you, or any applicable law or regulation, (ii) that you will make your own independent decision with respect to any course of action in connection herewith, as to whether such course of action is appropriate or proper based on your own judgment and your specific circumstances and objectives, (iii) that you are capable of understanding and assessing the merits of a course of action and evaluating investment risks independently.. MAECENAS does not purport to and does not, in any fashion, provide tax, accounting, actuarial, recordkeeping, legal, broker/dealer or any related services. You should consult your advisors with respect to these areas and any material with regards to investment decisions. You may not rely on the material contained herein. MAECENAS shall not have any liability for any damages of any kind whatsoever relating to this material. No part of this document may be reproduced in any manner, in whole or in part, without the written permission of MAECENAS except for your internal and/or personal use. This material is being provided to you at no cost and any fees paid by you to MAECENAS are solely general educational purposes. All of the foregoing statements apply regardless of (i) whether you now currently or may in the future become a user of MAECENAS’s platform or products and (ii) the terms contained in any applicable contract between you and MAECENAS.

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