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Crowdfunding, NFT allow young generations to enter market regardless of income
By Yi Whan-woo
"$ (Quadrant)," a screen print of four stylized dollar signs created by internationally-acclaimed pop artist Andy Warhol in the 1980s, is worth hundreds of thousands of dollars ― way more than an average office worker could afford.
But it could be possible if people pool funds together that can eventually grow large enough to buy such a piece.
This kind of "crowdfunding" campaign is increasingly being witnessed in the art market, along with other new investment strategies that allow a large number of people to participate regardless of their income level.
The new means of investment are found both offline and online including purchase of non-fungible tokens (NFTs).
NFTs are digital assets that rely on blockchain technology to verify ownership as real-world items, and include artwork.
The emerging investment trend, according to market observers, is heavily associated with the lifestyle and financial situation of some of the younger generation, especially millennials.
Some millenials may be characterized as having a great interest in music and art.
But because many of them are in the early stages of their careers, they have not saved enough money to own expensive artwork. The situation has prompted a need to create a new investment method for them to embrace.
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According to an Art Basel and UBS Report on the art market, millennials account for 52 percent of art collectors in countries where such collection is of major significance. They hold the highest among the four generations surveyed, including baby boomers, Generation X and Generation Z.
"Art as an investment in the past was considered something only for billionaires but it is no longer the case," said an employee of Art Together, a Seoul-based crowdfunding platform operator for those who are not wealthy but want to invest in art. "Overall it has become a younger investor demographic."
Founded in the late 2010s, the company purchases and manages masterpiece paintings on their customers' behalf.
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| A special exhibition of French artist Marc Chagall at the Seoul Museum of Art is crowded with visitors in this photo taken in 2018. The late 2010s, according to market observers, was when young people's interest in art as an investment asset began to grow. Korea Times file |
The company has so far bought 87 paintings from in and outside Korea. They include "Quadrant" by Warhol; "Cat," a 1957 pencil drawing by modern Korean painter Park Soo-keun; and "Maternite Rouge," a 1980 offset lithograph by France's Marc Chagall.
The company targets pieces that are up for sale, figure out the optimal purchase price and decides on the appropriate number of shares needed in total to raise money from individuals through an open notice on its website.
Each share usually ranges from 1,000 won to 10,000 won ($8), which is nothing for seasoned, wealthy art investors and well within reach of newcomers to the market.
The more an artwork costs, the more number of shares it is likely to be divided into.
For instance, "Quadrant" is priced between 140 million to 250 million won ($215,000) and divided into 16,980 shares, while "Maternite Rouge," which is in the price range of 40 million won to 70 million won, is divided into 5,466 shares.
The platform operator keeps an artwork for a couple of years before reselling it at a much higher price with the consensus of the shareholders.
During the period, the operator will rent the artwork out for exhibitions and take other measures to yield returns.
The shareholders will receive their cut from the profit made, and can cash out the shares if they do not want to wait until the artwork is resold.
The presence of young art collectors and investors is also seen at auction houses. The places are favored by those who are not as rich as older collectors but who can afford to buy a piece priced at a few thousand dollars.
"They are financially better off than the investors joining crowdfunding campaigns," said Eom Jin-seong, a former asset manager and CEO of Seoul-based art gallery Art Continue.
The new investment boom is drawing startups and larger firms as well.
Among them are Tessa, a startup that has not only attracted investors from Korea but also the United States, Japan and France through crowdfunding campaigns.
CJ OliveNetworks, an IT arm of CJ Group, agreed to work with Lambda256, a unit of Dunamu, to jointly enter the NFT market together and cooperate in related business and technology.
CJ OliveNetworks seeks to issue NFTs of intellectual property for artwork it holds.
Such an expansion of business will possibly require partnerships with the financial sector, such as securities companies and banks.
Asked whether this was possible, a bank official, however, said it was "unlikely."
The official noted the so-called "art funds" have not been as successful as expected and that finance companies are keeping their distance from these businesses.
