A PIECE OF ART
The start-up Arttrade specializes in the tokenization of art — investors can invest in high-priced works of art as well as in stocks. The novelty is causing excitement in the financial world, and there is some harsh criticism from the art scene.
It is the dream of many to own a work of art by well-known artists such as Heinz Mack, Gerhard Richter or Tony Cragg — but this usually fails due to the small change: an A4-sized watercolor by Richter can easily cost over €200,000. This is exactly the problem that Arttrade wants to alleviate: via the platform, small private investors can invest in works of art for as little as €1,000 — and secure a fraction of the work in return. Founder Julian Kutzim makes it clear in an interview with Forbes: “These are investments of the super-rich that were previously inaccessible to average consumers.”
Kutzim, who had worked in business journalism and corporate communications for years, founded the fintech together with David Riemer, whose family already collected art, in September 2021. Riemer and Kutzim came up with the pioneering idea of “cutting up” physical objects at the height of the NFT Bubble; Svenja Heyer joined the founding team in February 2022.
The concrete model: Customers receive a wallet to which tokens are transferred that represent the respective share in the work of art. The works continue to hang in museums, so the “decorative effect” of a picture above the fireplace no longer exists. Arttrade customers focus on returns. The financing volumes range from around €15,000 to €1 million.
The company earns its money through a subscription fee of 2% and an annual management fee of 2%, plus, not unlike the model of financial service providers, a profit share of 10%. “We didn’t start in the easiest market phase; people today have less money in their wallets and are more cautious,” says Kutzim. The team therefore decided to build a second pillar: Similar to the financial industry, where you can invest in ETFs (i.e. passive products that replicate broad indices) in addition to individual stocks, Arttrade also offers investments in such products. Together with the German art dealer Weng Fine Art, the company has been offering an “art ETF” since July 2023 that tracks the performance of a “curated portfolio of blue-chip artworks” (works by well-known artists). This generally limits the risk of price losses that exist with individual works. Due to this field, in addition to private investors, family offices, asset managers and private banks are increasingly interested in investing with Arttrade.
To this end, the fintech raised €2 million in debt capital in August — the investors included the financial service provider Rhein Asset Management and Ingo Hillen, who heads Sino AG, which also invested in the neobank Trade Republic. The money is intended to finance the further expansion of the business customer division.
In terms of returns , Arttrade has to deliver — because if the luxury of being able to hang a valuable picture in the living room is no longer available, investors are only interested in the profit margin. The company admits this openly. Julian Kutzim is of the opinion that art should be added to the portfolio as an attractive investment class: “In fact, we find that many of our customers invest for rational motives, but then deal more intensively with the art itself because it provides a reference point to the works have. “The interest in art grows through financial participation,” says Kutzim. Arttrade does not hide the works of art in safes, but lends them to exhibitions. In addition, the company regularly organizes exhibitions and events; most recently in the luxury boutique hotel The Wellem in Düsseldorf, where the photos shown were taken for Forbes.
However, Arttrade is cautious when it comes to precise revenues. The start-up’s website says: «It is not possible to make an exact statement about the expected return as many factors play a role.» Specifically, blue-chip works by artists have had an average annual return of 8 since 2000. 9% (Artprice 100 Index) — that is more than that of the German leading index DAX (3.1%) or the US S&P 500 (4.2%).
However, the historical return is always stated for each artist — and this can certainly fluctuate. While the historical return of the young US photographer Nan Goldin is given as 0.4%, the historical return of Gerhard Richter is 10.6%. Arttrade also works with a risk indicator that is rated six out of seven risk points for its own products. For comparison: stocks are rated on average with three to four risk points. Julian Kutzim therefore recommends that blue-chip art be included in a portfolio to the extent of ten to 15%.
However, the art market is crisis-resistant and more resilient than other markets, says Kutzim. In addition, there is no correlation to the stock market. The average holding period is currently five years. Early exits are not possible for the time being. The customers as well as Arttrade benefit from the sale — as long as it makes a profit, of course.
However, criticism of the approach and the numbers comes from the established art scene: Forbes spoke — on condition of anonymity — with experts who had no good opinion of Arttrade. The prices for the works are significantly too high in comparison, and the promised returns are not realistic. Julian Kutzim sees this criticism as unjustified: “To determine the price, we look, among other things, at historical and current auction results as well as gallery prices for comparable works.” When asked about the criticism, Kutzim refers to Richter watercolors (with dimensions comparable to those of Arttrade), which were sold at the traditional auction houses Sotheby’s Paris and Christie’s London between 2019 and 2021 for more than €350,000 each.
According to Kutzim, most people don’t have the capital or network to access art; There would also be a lack of know-how to be able to judge which assets are the right ones and at what price. Kutzim: “This is what we call democratization of the art market. Through us, many people can participate in the art market.”
