YieldStreet
YieldStreet's Michael Weisz and Milind Mehere
- YieldStreet, a fintech platform that just wrapped up a $62 million Series B funding round, is buying an art financing company from private equity firm Carlyle.
- YieldStreet already offers investments ranging from real estate to maritime financing. The $170 million acquisition will allow the platform's investors - right now, all wealthy individuals, though the company plans to expand to the masses - to add art loans to their portfolios.
- The fintech's cofounder told Business Insider that art is a good investment for investors of all stripes, but academic research from Stanford cautioned "the returns of fine art have been significantly overestimated, and the risk, underestimated."
- Visit Business Insider's homepage for more stories.
Wealthy individuals who want to reap the financial benefits of investing in a Monet without actually owning an $80 million painting will soon have a new option.
YieldStreet, a financial platform that offers exotic investment products like marine finance and loans to law firms to the mass affluent, is buying an company called Athena Art Finance from private equity firm Carlyle in a deal valued at $170 million. YieldStreet's 100,000 investors will be able to invest in art financing as a result of the deal.
The deal comes as more financial technology players are trying to open up access to investments previously reserved for institutional or ultra-wealthy investors, such as private equity. Earlier this week, Nasdaq and iCapital, a BlackRock-backed alternative investment company, said they're working to create a platform that will launch later this year to allow private fund investors to sell their stakes before the end of a fund's life.
YieldStreet offers alternative investments to accredited investors, who earn at least $200,000 a year or have $1 million in net worth, and requires a minimum investment of $5,000. Rather than conventional assets like stocks or bonds, the company's portfolio consists of loans to commercial real estate projects, small businesses, and law firms - and now, individual pieces of art and portfolios. New York-based YieldStreet is just coming off a major funding round, raising $62 million in a Series B in February meant to fuel new hires and these types of acquisitions.
The platform will continue to add more investment options, with two new products set to launch in the next three months, cofounder and president Michael Weisz told Business Insider.
"We need to identify new products," he said, adding that one area for expansion could be private equity. "Our average deal sells in minutes and 88% of our investors get locked out."
Weisz said art's an attractive investment because it's a less mature and competitive market than more established asset classes, like real estate, but it's big enough to provide scale.
"The art market in general over the last 20 years has been doing phenomenally well," he said. "But the average person hasn't had visibility into luxury goods and how they translate into strong consistent investments."
Weisz also said that investors are more protected in a downturn because art can simply be stored in a warehouse, unlike a commercial building, which might need to go through an expensive and time-consuming foreclosure process or sale.
While Weisz said art is an appropriate investment for investors of all stripes, a trio of professors from Stanford and other schools found in a 2013 paper that "the returns of fine art have been significantly overestimated, and the risk, underestimated." Their research showed the total annual return of art as an asset class from 1972 to 2010 as 6.5%.
"Buy paintings if you like looking at them," the researchers concluded. "You can hope that your children will sell one or more of them later for a gain - but paintings are primarily aesthetic investments, not financial ones."
Despite the researchers' pessimism, art as an investing strategy is increasingly appealing to rich millennials, who are twice as likely as other collectors to view it as a financial asset, according to a Bank of America survey last year.
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