Crowdfunding /ˈkrowd·fuhn·duhngˈ/ noun
the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the internet.
In last week’s issue of The 101, we discussed alternative assets and how you no longer have to be an accredited investor to take advantage of them.
That means no more high-income barriers to entry, access to a wealth of securities you probably already love but didn’t know you could invest in and a rapidly burgeoning crowdfunding sector.
And since traditional finance elicits imagery of crusty old men in top hats stinking of mothballs and single malt whisky while discussing derivatives … we wanted to share a fun way of investing.
One of the most critical components of successful investing is diversification. You want a healthy mix of stocks, ETFs, Treasurys and mutual funds while also taking advantage of high-yielding CDs, money market accounts and online banking to boost savings.
But now more than ever, it makes sense to introduce alternative assets to your portfolio. Today, we’re going to dive into seven crowdfunding platforms that feature them, ranging from fine wine and artwork to sports collectibles and comic books.
No. 1: Collectable
This platform has a bit of it all, including sports cards, art, comics and watches. From 2017 to 2022, Collectable oversaw $50 million in transactions that netted an average ROI of 60%. That includes:
- A 143.3% return on Patrick Mahomes’ 2017 Flawless Emerald card, which sold for $115k.
- And 177.8% return on Sandy Koufax’s 1955 Topps card, which sold for $100k.
Collectable also features what’s considered the world’s most valuable baseball card: the 1952 Topps Mickey Mantle. In August 2022, it set a record for the highest amount ever paid for any sports item, card or memorabilia when it sold for $12.6 million. Shares are available on Collectable for $23.95.
No. 2: Rally
Last weekend, one of our staff spent a day at the beach hunting for fossilized sharks’ teeth with his son. They found nearly a dozen.
But for those unwilling to dig in the sand (you’re missing out) or who don’t live near a beach, Rally’s a platform drawing the interest of fossil hunters the world over.
The site’s offering $10 shares of the triceratops skull discovered in 1999 in North Dakota by Dr. Bobby Deaton of Texas Wesleyan University.
Rally’s alternative assets hardly stop at archaeological digs, though. Members have the opportunity to invest in:
- Sports collectibles like LeBron James’ 2002 high school sneakers gifted to him by Kobe Bryant. $10/share. Market cap: $180,000.
- Books like the 1851 first edition of Moby Dick. $7/share. Market cap: $70k.
- Cards like Wayne Gretzky’s 1979 Topps rookie card. $40/share. Market cap: $800k.
- Comics like 1940’s DC #1 Batman. $10/share. Market cap: $2 million.
- And luxury cars, like the above-pictured 1955 Porsche 356 Speedster. $212.50/share. Market cap $425k.
For those interested in seeing their investments in person, Rally’s assets are on display at a New York City showroom reopening this summer.
No. 3: Public
Public offers stocks, ETFs, crypto and Treasurys, but members can also access alternative assets, which run the gamut:
- A pair of game-worn Air Jordans autographed by MJ and are just one of two known pairs to feature his rookie signature. Shares are $16.45 and are up 64% in the past six months. Market cap: $110k.
- The renown Giant Size X-Men #1 comic book, among the highest graded copies in circulation. Shares are $99.99 and are up 41% over the past six months. Market cap: $49.99k.
- And a Hermès Birkin luxury handbag produced during an extremely limited run in 2011. Shares are $8.65 and are up 21% in the past three months. Market cap: $50k.
No. 4: Masterworks
Here’s a secret the rich don’t like sharing: During periods of high inflation, historically, gold returns 3.2%, the S&P 500 returns 5.5% … and contemporary art returns 13.5%.
Masterworks is a major player in the crowdfunding art space, with over 729k members, 278 artworks purchased and nearly $787 million in assets under management (AUM).
And the platform has an impressive track record to go along with its significant AUM, including net returns of:
- 32% on a Banksy piece held for 378 days.
- 35% on a Cecily Brown painting held for 686 days.
- And 39.3% on a George Condo artwork held for 532 days.
Aside from serving as an inflation hedge, these artworks are expertly sourced, insured and held in secure facilities. Shares can be purchased for as low as $20 after Masterworks securitizes each collection or individual painting.
Pieces generally take between three to 10 years to sell, and in addition to its annual fees, Masterworks charges a 20% profit-taking fee on its exits.
No. 5: Fundrise
The housing market sucks. There’s no other way to put it.
30-year fixed mortgage rates are the highest since 2008’s Great Recession. On top of that, affordability disappeared. To purchase a $300k house, you now have to make $50k–$75k/year. The problem with that is twofold:
- The average American salary is just $43,558.
- And the average American home costs $436,800 … 32% higher than 2020.
But thanks to Fundrise, an alternative asset investing platform with 1.9 million users, real estate investing is still accessible.
The site has a $7+ billion portfolio of crowdfunded real estate projects, and in 2022 when the S&P 500 lost 18.11%, Fundrise members gained 1.5%. The year prior, its portfolio was up 22.99%.
Moreover, the net return for members of Fundrise after seven years is a robust 83.8%:
Funrise allows minimum investments of $10 and has paid over $124 million in investor distributions. Its portfolio is comprised of 20k well-located residential units and e-commerce-focused industrial assets (e.g., warehouses and shipping centers). Returns are surging backed by higher interest rates and tighter real estate markets.
No. 6: Vint
Wine (and alcohol in general) is considered consumer staples. When household budgets are squeezed by inflation, wants give way to needs. And though it may seem counterintuitive, alcohol is an enormous need.
The industry generated $284.1 billion in revenue in 2022, and spending has steadily increased each year since 2020.
According to the London International Vintners Exchange, an index that tracks 1,000 wines from around the world and provides a broad measure of the market, U.S. buyers bolstered by weakened European currencies have been taking advantage by purchasing stocks of European wines at favorable costs.
And like fine wine itself, the market has been aging nicely. By the end of Q3 last year, the fine wine market was up 14.10% while the S&P 500, Nasdaq and Dow were all posting historic losses.
Founded in 2019, Vint is an SEC-regulated platform that enables you to invest in fine wines and rare spirits. New collections are offered monthly, but they fill up quickly, and the site states that its collections are intended to be held for three to seven years.
Bonus: Vint allows members to invest through self-directed IRAs.
Returning to Q3 2022, Vint was able to close four collections for an annualized net return of 28.38%, including 16.24% on its California Collection (100% of assets sold) and 34.34% on its German Collection (14.04% of assets sold).
No. 7: Equifund
The last platform we’re profiling today is Equifund, one of many that gives investors access to early-stage startups before those companies seek to go public or are acquired.
According to the Chartered Alterative Investment Analyst Association, private equity investments have produced a return of 16.1% over a 21-year period beginning in 2000.
That isn’t as appealing as some of the aforementioned returns, especially when you couple that most startups don’t make it. It’s critical for private equity investors to conduct thorough due diligence in order to find the opportunities most likely to succeed.
That said, Equifund is one of the more reputable early-stage investing platforms, having raised over $50 million for companies featured on its site. Some of the startups are already profitable, are led by executive teams with decades of industry experience and many have already had successful exits or IPOs with other companies.
TL;DR
The ultra-wealthy have invested in alternative assets for centuries. By breaking those assets into fractional shares and making them available via crowdfunding, the aforementioned platforms make investing in these assets easy, accessible and profitable for all.