‘The third peak of the Basquiat crown, please’ Fractionalisation, and Other Recent Forays for Art Investment

Harry Laventure

Basquiat’s Untitled (One Eyed Man Or Xerox Face) (1982) was purchased by Masterworks for $25,200 before being sold at $14.7 million. Credit: Masterworks 2025

Magritte’s apple? The third leg of Warhol’s chair? The dinner party hypothetical of owning one painting from the labyrinthine corridors of art history has gathered further refinement – if you could possess one fragment of a masterpiece, what would it be? In any practical case, it doesn’t matter too much. Owning a work of art, even for investment purposes, had long been something solid, tangible. Whether appreciating or stagnating, tax-evading or connoisseur-bating, the imagined, preferably well-garmented collector could always sip the morning espresso in the company of their chosen relic. Today, new extensions of investment approaches to the art world offer products of novel abstraction. Rising to cater to the post-pandemic symptoms of buyers unwilling to be nomadic, and adding a new vibrance to the dangled carrot for those who haven’t considered art investment in the past, we are reducing art to its purely monetary value. Indeed, the presently popular crusade of ‘democratisation’ purports to let anyone walk among the waterlilies. Will it prove a bubble? A rabbit out of the hat, but embarrassed by its lack of clothing? To coin the overused parry, it is a little too soon to say. But let us take the runway of the art market’s more recent innovations, to speculate.

To begin with, fractionalisation is the process of splitting up ownership rights for a given work of art. Dividing a piece into numerous stocks, it permits thousands of investors a share of a work’s success or failure when it sells. Buyers can hop in and out of a secondary market as they choose on the back of repeat appraisals, whilst never being in the same room as the work. This very simple concept, with precedent elsewhere in alternative investments, is gaining much attention for its elastic potential – what people are quick to ignore is whether it is actually a good idea. 

The most famous company in the cavalcade, with apt reason, is Masterworks. Their CEO and founder, Scott Lynn, has a long and illustrious track record of finding where the edge cuts. As something of an early internet prodigy, Lynn built his first company at 15. A quintessentially entrepreneurial college dropout, he has since grown companies like Virtumundo (later Treeloot.com), Adknowledge, and Payability. Having collected from the age of 20, Lynn has amassed and loaned works from constellations of Pollock to Rothko. Turning his hand to disruption of the art world, Masterworks was created in 2019, with a view to ‘turn that passion into a business’ [The Investment for Beginners Podcast] .

Credit: Masterworks 2022

Their model is simple, but brilliant. A team of researchers, financial and art-historical, review performance of blue-chip paintings, and buy those with the highest return potential. The work of art – for the time being solely paintings – then has its own LLC or IPO set up, having securitised with the Securities and Exchange Commission to ‘take it public’. An offering circular is generated and advertised, and stocks are purchasable for as low as $20 to us Toms, Dicks, and (in this case specifically) Harrys. The paintings are then held for 3-10 years – this commitment carries the morbid touch of only being open to prospective clients under 70 – and when the results are in, Masterworks takes 20% of the profit. A buyer has the option to trade their fragments on the secondary market in the meantime. 

At point of writing, Masterworks’ armoury has 450 paintings from Warhol, Banksy, Basquiat, Picasso, and other lodestars of the high value art scene. It capitalises on figures that show blue-chip art to have ‘outpaced the S&P by 32% from 1995-2024’ and proudly declares that a cool $61,357,243 has been redistributed back to its investors from its 23 sales – with one George Condo boasting a 39.3% Internal Rate of Return over its 538 days held [Masterworks]. These statistics are all over its website’s opening blazon, and with good reason: at time of writing 985,127 users are reaping the rewards, and seductive facts like the above disarm the casual of the need to know anything that is actually going on. Masterworks’ in-built system of Stock B conversions, for example, is a genius mechanism for diluting customers’ payouts – easy to miss behind the pyrotechnics. 

Elizabeth von Habsburg, Nanne Dekking and Peter Loukas are at the helm of the new Winston Artory Group. Courtesy of the Winston Artory Group. Credit: Observer 2025

Upping voltage on the defibrillation, many other colossal players are coming to the LC6 table of changing what it means to invest in art. One headlining coalition is the collaboration between Artory and the Winston Art Group. The respective art tech firm and appraisers have merged under the banners of companies like Strobe Ventures, CMT Digital, and Galaxy Digital. Their new concept synthesises a database of over 50 million art market transactions, blockchain mechanics, historic expertise, and a client list as long and glittering as a Nick Cave song. In the scope is the handling of $15 billion in valuations this year alone, bringing ‘intelligent stewardship for the world’s most meaningful assets’ [Winston Artory Group]. AXA XL has already announced a strategic partnership therewith. The new cocktail has a potent allure here for clients and businesses alike. Winston have been in the game since 1993, and built a reputation for outstanding service and sensitivity. Infusing their comforting familiarity and reliability with something as nebulously (and practically) zeitgeisty as tech extirpates anachronism whilst retaining the sillage of New York penthouses. More incisively, perhaps, the database also boasts access to a deluge of private sales traditionally kept out of sight. As Daniel Cassidy writes, Winston Artory ‘is appraising the state of the art market itself’[ARTNews]. Perhaps we would do well to remember that it is traditionally a patient with a syncopated heart rhythm. 

The alternative investment platform Yieldstreet too has varnished its monetary landscapes with similar approaches to art. As with much of their broader branding, they take fractionalisation one step further than Masterworks. Purchasing from both blue-chip and mid-career artists, they bundle together whole collections of paintings, and fractionalise the total value of the mixture. Back in 2019, Yieldstreet acquired Athena Art Finance for $170 million, harvesting its proprietary database analysis with a view to supercharge its acquisitions. Since then, six offerings have been curated [ARTNews]. For $10,000, the curious can dip their toes into an average of a 12.2% IRR on the $400 million worth of art investment which they have funded to date [Yieldstreet]. The main selling point is the diversification of the art assets themselves, the logic being that if enough varieties of popular art are lumped together, their insoluble fluctuation in success only amplifies the reliability of the whole product. The Art Equity Fund V, for example, catalogued Amy Sherald, Jack Whitten, Lynette Yiadom-Boakye, Jordan Casteel, and Howardena Pindell among others. Supplementary works of art can be added throughout a fund’s life. Again, ‘simplicity’ is highlighted as a pull: after all, ‘Yieldstreet takes the guesswork out of art ownership’.

Yet, it is worth noting that Yieldstreet’s acquisition of Athena was an unexpectedly cheap one, for all the funding poured in. As I sat down to write this, Yieldstreet’s colossal losses in real estate fractionalisation hit the press [CNBC]. The incurred destabilisation of public perception will ricochet for a few weeks yet. Other names in circulation are Particle (more NFT-oriented), Rally (comics), and Rares (shoes… yes shoes). All are embracing what it means to fractionalise their collectable items as to juice their alternative investment zest.

As the present art-market dormancy continues to snore, serious legal tender is being thrown at these ventures. Rather melancholically, with all the deflating naivety that only a student can harbour, one will notice how little of the above is about the art itself. Lyrical waxings aside, perhaps there is a morsel of market nous in this. There is no sustainability in hunting for circles on timelines. Bismarck’s old line about listening for God’s footsteps in history and grabbing on tightly to the coattails doesn’t function if we are only reviewing his pedometer. The new investment strategies form an à la carte for innovative policing structures, calculating precise maintenance of art working as a valued product. For all the aphorisms of human nature’s consistent pulse in art, taste shifts to dictate on no logical pretence. True collectors are few and far between, but art will not survive as an asset alone. This decade’s instalments of art market approaches rely, in great part, on investors being told what ‘good art’ in value is rather than meaning. The two never align perfectly, but likewise can never be amputated from each other in pertinence to any era’s crop of preference. Subjectivity is a wondrous thing. When it is largely equivalent to actual worth, trends are candlelit lamps in the fog. Forgetting this, even when tech says so, seems myopic to me. Only time will tell, alas, but the stakes have been amplified tenfold, and the odds seem to have left caprice absent from consideration.