New Investment Trend: Fractional Art Ownership Gains Traction, But Is It a Bubble?

Chairman of Eko Electricity Distribution Company, Dere Otubu, and Chairman, First Ally Capital, Femi Okunsanya.

The presence of these dignitaries at the event highlighted the importance of art in our society, not only from a cultural perspective but also as a multidimensional asset class that can drive wealth creation and socio-economic development.

However, to create genuine access to this cultural wealth, we must find ways in which we can make art affordable to those outside of the HNWI (high-net-worth individual) bracket. Yet we have to be cautious in how we do this.

The desire to democratise art spurred the development of the NFT (non-fungible token) market, with these tokens becoming an entirely new cryptocurrency asset.

NFTs are a digital representation of an asset, such as a work of art, recorded on a blockchain to allegedly ensure authenticity.

While certainly more affordable than a Picasso, like any cryptocurrency, they are considered a very high-risk investment, and one crypto investment research company has alleged that almost 96% of NFTs are “dead”, or no longer have any value – lending credence to the idea that the tokens are a fad.

Thankfully, there are safer ways of investing in art. A recent trend towards fractional ownership has been gaining traction since last year, where buyers can purchase fractional shares of a given artwork for partial ownership.

The London based market research firm, ArtTactic, conducted a survey earlier this year revealing that more buyers in the art market were cautiously partaking in the practice of fractional ownership – from 9% in 2023 to 16% in May this year.

The largest firm in the fractional ownership art business, New York’s Masterworks, has been able to secure more than $1 billion (USD) in capital since it was established in 2017, purchasing more than 415 major artworks to fractionalise and sell to investors.

Similarly, blockchain technology has been used to tokenise physical art pieces – yet another way to enable fractional ownership.

It remains to be seen if this trend is yet another bubble waiting to burst, but it is impossible to deny this is an innovative way to democratise access to (partial) art ownership.

It will likely be the fintech innovators who will be central to lowering the barriers to art collection and investment, and considering Nigeria remains in the top five African countries for fintech investment, I suspect we may see such innovative investment platforms sooner rather than later.

At Coronation Group, we will continue to promote the art itself, the collectors, artists, and the capabilities of Nigerian art to diversify investment portfolios. Because when we invest in local art, we don’t just enrich ourselves, we enrich our culture.

.Akinyele is the Chief Marketing and Communications Officer, Coronation Group

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