The new frontier asset: Fractional art

The auction hammer falls at R1.8bn. That’s what a single Leonardo da Vinci painting fetched in 2017, making it the most expensive artwork ever sold. While such astronomical figures might seem to place art investment firmly in the realm of billionaire collectors, a quiet revolution is reshaping who can participate in this historically exclusive market.

High-end art has always made for a compelling alternative investment, combining cultural significance with impressive financial performance. The numbers tell a remarkable story: since 2000, the Artprice100 index, which tracks the world’s top 100 artists, has delivered annualised returns of 8.6%, marginally outperforming the S&P 500’s 8.4% – including dividends – over the same period. Excluding dividends, blue-chip art has outperformed developed equities by 4% a year since 2000.

But what makes art especially attractive isn’t just its returns. It’s the low correlation with traditional asset classes that makes it a powerful portfolio diversifier.

For South African investors seeking alternatives to volatile equity markets and uncertain economic conditions, art represents something unique: a tangible asset that can provide both aesthetic pleasure and financial growth while offering protection against currency fluctuations and market downturns. 

Art as asset class  

The global art market, worth about $65bn in recent years, now attracts institutional investors, family offices and, increasingly, everyday investors looking for exposure to this alternative asset class. 

The appeal goes well beyond pure financial returns: benefits include aesthetic enjoyment, social prestige and the satisfaction of supporting artistic heritage. These intangibles help explain why a higher proportion of collectors cite emotional value as their primary motivation, followed by those citing financial value, according to the Deloitte Art & Finance Report 2023. 

Meanwhile, the digital revolution has completely transformed how accessible art investment can be. Online sales made up 18%-25% of total market turnover in 2024, a significant increase from 2022’s 15.9%.

And, recently, fractional ownership platforms have emerged to tackle traditional barriers to buyers, such as high capital requirements and the expertise needed for direct art acquisition. 

It’s clear that generational shifts are driving this change even further; roughly half of young collectors are interested in fractional ownership, while 83% prioritise investment returns compared to just 43% of older collectors. This shift has, inevitably, opened up opportunities for innovative investment platforms. 

Masterworks is probably the most globally well-known fractional art investment platform. It popularised the concept by letting investors purchase shares in individual high-value artworks. The platform focuses on paintings by blue-chip artists like Basquiat, Banksy and Picasso.

A portfolio approach vs individual selection 

While investing in individual artworks offers the thrill of backing specific pieces, it also comes with significant selection risk. A single artwork’s performance depends on many factors: the artist’s career trajectory, market sentiment, how well it’s preserved, and whether its provenance checks out. Even Masterworks can underperform if market tastes shift or questions arise about authenticity. 

This concentration risk has led some platforms to take a portfolio approach rather than betting on single artworks. This offers investors exposure to diversified art portfolios rather than individual pieces. It’s basically applying modern portfolio theory principles to art, spreading risk across multiple artworks, artists and market segments. 

The portfolio approach has several clear advantages: it reduces the impact if any single artwork underperforms, captures broader market trends rather than artist-specific movements, and allows for strategic allocation across different segments of the art market, from emerging artists to established masters. 

The attraction is real

Unlike stocks or bonds, art provides aesthetic pleasure and cultural engagement that can justify an investment even during periods of modest financial performance. 

Some platforms offer display rights to larger investors. This means you can hang museum-quality artworks in your home or office for a period, enjoying the tangible benefits of ownership while maintaining your investment position. For smaller investors, some platforms also arrange loans to major South African museums, ensuring the artworks remain publicly accessible while generating cultural value. 

This approach tackles a fundamental tension in art investment: balancing financial objectives with cultural stewardship. By enabling both private enjoyment and public access, platforms like this create value that goes well beyond pure financial returns. 

What to consider  

If you’re considering adding art to your investment mix, several key principles emerge from current market dynamics. First, art is a long-term investment. For optimal returns, you’re typically looking at seven- to 10-year holding periods. Second, prioritise diversification over picking individual artworks unless you have deep market expertise and can handle potentially higher risk. Third, factor in the total cost of ownership, including insurance, storage and transaction fees, which can significantly impact your net returns.  

Art investment has evolved from an exclusive collector’s pursuit to a sophisticated, but accessible, asset class. While the art market will inevitably go through buoyant and less buoyant cycles, its combination of cultural significance and wealth diversification continues attracting investors seeking both financial returns and meaningful engagement with human creativity. 

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