Guide
How Art Investing Works
Fine art has long been a cornerstone of wealthy family portfolios. Through fractional ownership platforms, individual investors can now access the same asset class with much smaller minimums.
The Fractional Model
A platform like Yieldstreet purchases a blue chip artwork, creates an LLC to hold it, and sells shares to investors. You own a percentage of the LLC, which owns the painting.
The Process
- 1. Acquisition: Platform experts identify and purchase a work with appreciation potential.
- 2. Securitization: The work is placed in an LLC and shares are offered to investors.
- 3. Holding Period: The artwork is stored, insured, and sometimes loaned to museums (3 to 10 years typical).
- 4. Exit: The platform sells the work at auction or privately. Proceeds distributed to shareholders.
What Makes a "Blue Chip" Artist?
- Established auction track record with consistent sales
- Works held in major museum collections
- Significant art historical importance
- Limited supply (deceased or late career artists)
- Global collector demand
Top Blue Chip Artists by Market Performance
Jean-Michel Basquiat
+17.9% CAGR
Andy Warhol
+12.4% CAGR
Gerhard Richter
+10.8% CAGR
Banksy
+14.2% CAGR
Costs and Fees
- Management Fee: Typically 1.5% annually
- Carry: 20% of profits above a hurdle rate
- Storage & Insurance: Included in management fee
- Transaction Costs: Auction fees (if applicable) at exit
Risks to Consider
Key Risks
- Illiquidity: You cannot sell shares until the artwork sells (3 to 10 years)
- Market Risk: Art values can decline, especially during recessions
- Concentration: Single artwork exposure in each investment
- No Income: Art generates no cash flow during holding period
- Survivorship Bias: Published returns often exclude underperforming works
Tax Considerations
Art is classified as a "collectible" by the IRS. Long term capital gains on collectibles are taxed at 28% (higher than the standard 20% rate). Consult a tax professional for your specific situation.
Is Art Right for You?
Art investing may be appropriate if you:
- Have a long time horizon (5+ years)
- Want portfolio diversification beyond stocks and bonds
- Can accept complete illiquidity
- Understand you may lose some or all of your investment
Ready to Explore Art Investments?
Talk to our team to learn about current offerings and whether art fits your portfolio.