What Does the Future Hold for Alternative Investments?

October 12, 2021

Alternative investments aren’t just the playground of folks who qualify for the phrase “high net worth” anymore. In fact, the 21st century has increasingly opened up the world of alternative investments to the average investor.

And with our crash landing into the 2020s, we’ll see some long-term ripple effects in investor behavior play out over the next several years.

Here’s a look at what the next few years has in store for alternative investments and what investors like you can do to capitalize on those trends to build your own wealth.

Influence of the Developing World

Investing: it’s not just for Wall Street, the Square Mile, and Credit Suisse anymore.

In the 21st century economy, emerging market countries will play an ever-more important role in shaping the global economy, particularly markets in Eastern Europe, East Asia, and Latin America. For one thing, improved access to healthcare has drastically improved life expectancy in these regions, which has brought up the total working population both in terms of numbers and how long they remain in the workforce.

At the same time, many of these countries have grown increasingly liberal in their economic policies, opening the door for greater future growth and improving freedom of trade. That translates into increased trade overall, reinforced by an increasingly robust middle class who account for significant annual spending.

For investors, that means new and exciting opportunities for growth—and for smart investors, more opportunities to benefit from long-term growth in emerging markets.

More Diversified Portfolios

If COVID-19 taught us anything, it’s that the stock market can crash at any time without warning and without clear signs of when it will rebound. And if you aren’t prepared for those unexpected swings, your portfolio will suffer for it.

The ones who stayed afloat were the ones who planned ahead and protected their investments against potential ebbs and flows with a diversified portfolio.

For this reason, as we move ahead from 2020, we should expect investors to internalize the rule that experts have preached all along: diversification is your saving grace. Investors will turn an eager eye to future-proofing their portfolios. And since investors have more access to information than ever before, with more tools and resources available for average investors to learn, we’ll see investors spreading their investments across a broader range of assets.

Plus, the dips in the stock market and increased interest in alternative investments mean that more investors are likely to rely on alternative investments to insulate their portfolios. What this means depends on the investor and their resources.

The New Generation of Art Investors

Almost every market took a hit in 2020, but the art market was among the ones that held steady. In fact, it was one of the markets that showed impressive resilience, with the SMM All Art Index posting a 1.6% increase between 2019 and 2020 supported by a 2.3% increase increase in the number of bidders per auction.

What’s behind the growth in art?

For one thing, young investors (Millennials in particular) are increasingly interested in the art market as an investment avenue. In fact, Millennials are more likely than any other age group to view art as a financial asset, and a worthwhile one at that.

For another, the move to online bidding means it’s now easier than ever for investors to engage with art auctions. In fact, online bidding saw $400 million in art sales in the first half of 2020 alone. This was assisted by severe restrictions on public gatherings, but even so, the sheer dollar value of art sales in a time when many businesses saw catastrophic drops is astonishing.

Also, online engagement (social media, specifically) is likely playing a huge role in driving Millennial interest in art investing. Millennials know more about art than their elders (Millennials are twice as likely as likely as Baby Boomers to say they know something about art) and they almost universally agree that art is important to them. More tellingly, 53% of people overall say they have engaged with art on social media, 55% say social media plays an important role in discovering new art, and 79% of Millennials say that social media allows them to engage with art in new and interesting ways.

Granted, most Americans still view art as a luxury item. The good news is that there are now tools for investors (even small-time investors) to engage with art (even multi-million-dollar art) as a valuable financial asset.

Get Your Start with Alternative Investments

That’s where we come in.

At Masterworks, we know that art is one of the most successful forms of passion investing. We also know that everyone should be able to access this incredibly successful asset class. That’s why we built the first platform in the world for buying and selling shares in iconic, multi-million-dollar artworks.

We partner with Citi Bank and Bank of America to identify the fastest growing artist markets with the best risk-adjusted returns. Then we purchase artwork, file an offering circular with the SEC for each new painting, and open up the art for interested members to buy shares. And don’t worry, we buy a lot of art. We’ve bought $200 million in art so far and average between $1 million and $30 million value in new painting offerings every 10 days.

Once we have art, we hold onto the art for three to five years on average to allow time for growth. Then, when it’s time to sell, we handle the auction process and disburse your gains. Ready to join this exciting asset class and grow your wealth while investing in something you love? Fill out your membership application today.

Masterworks is a fintech company democratizing the art market. Our investors are able to fractionally invest in $1mn+ works of art by some of the world's most famous and sought-after artists.