Investment

Families underpin the trading platform revolution in fine wine, art, watches and classic cars, etc…

A digital revolution funded by family offices is sweeping through the worlds of fine wine, art, watches and classic cars, as entrepreneurs use trading platforms to compete with intermediaries. Real estate securitisation, NFTs and crypto derivatives are also in the mix. 

In the latest development, Société Jacques Bollinger, the champagne family, has raised its stake in Bordeaux Index, provider of the LiveTrade platform for wines and spirits transactions, for an undisclosed sum.

The system offers buyers and sellers transparent prices, cost-efficiency and liquidity. It stays open 24 hours a day because computers never sleep.

The business is chaired by Lord Michael Spencer, former head of Icap, the money broker, where Bordeaux chief executive Gary Boom used to trade interest-rate options.

The system offers buyers and sellers transparent prices, cost-efficiency and liquidity. It stays open 24 hours a day because computers never sleep

Its wines incur an average price of £230 a bottle, appealing to relatively wealthy investors. LiveTrade saw a 55% rise in trading volumes in 2021.  During the year, the Liv-ex 1000 fine wine index rose 24.7% against a 15.7% S&P 500 gain.  

In the first quarter, the wine index rose a further 7.25%, against the S&P’s fall of -4.6%.  Many collectables have risen by a similar amount as clients shrug off bearish market sentiment, for now.

Ease of trading access is facilitating an alternative wine investment industry via providers like Cult Wine Investment and AssetTribe, in partnership with wine merchant OenoGroup.

Chrono24 is continuing to make progress in trading luxury watches, following a profile in Family Capital on 17 August. Last year it raised $120 million from investors co-led by Bernard Arnauld’s AglaéVentures, along with Alberto Grignolo (Yoox) and Oliver Samwer (Rocket Internet). The site offers 500,000 watches for a sale with a total value of $4.3 billion. It has brought unprecedented transparency to its sector.

Auction houses are opaque and continue to dominate the art world. But a little sunlight has shone in through Masterworks whose platform allows investors to buy shares in individual artworks.

Masterworks is backed by Tru Arrow, an investment office led by James Rothschild, adviser to Rockefeller Capital Management; Glenn Fuhrman, co-founder of Michael Dell’s MSD Capital and Adam Silverschotz, recently at TCV, where he led its ByteDance deal. VC firm Left Lane Capital is another investor, plus Galaxy Digital whose Mike Novogratz says he remains bullish on crypto investing, despite problems at coin promoter Terra, which he backed. 

Scott Lynn, chief executive of Masterworks, worth a notional $1 billion, says he is “making the world of art a little less exclusive” by helping retail buyers invest in shares in works by the likes of Banksy, Picasso and Warhol, whose price is normally beyond their reach.

In a statement Glenn Fuhrman said: “We believe this model unlocks significant unmet demand, allowing access to art as an asset class to all investors.”

Elsewhere, Sotheby’s and Christie’s have entered the NFT market, knowing it has become home to some types of modern art. OpenSea, a leading NFT market, has raised $427 million from the new wealthy. 

They include Joachim Lecrivain (Blackstone); Seth Weinstein (ex Morgan Stanley); Dylan Field (Figma), Tubi Lutke (Shopify), Naval Ravikant (AngelList) and Ben Silbermann (Pinterest). 

OpenSea trades and ranks NFTs and, for the record, the current top image, based on price and volumes, is a cartoon series called the Trippin’ Ape Tribe.

In real estate, individuals are starting to be drawn towards investing in shares in individual buildings. Lex Markets has been selling shares in pre-IPO real estate to investors for as little as $250, most recently at East Pike Street, Seattle. Its $27 million backers include Khosla Ventures and Peak6 Capital, an investment business run by Jenny Just and her husband Matt Hulsizer.

Another husband and wife team, McKeel and Soon Hagerty, found a way to revolutionise the classic car industry by getting support from Robert Kauffman, co-founder of hedge fund Fortress, to take their business public through his SPAC.

McKeel’s parents, Frank and Louise, built the original classic car insurance business. He went on to develop businesses offering members insurance, rentals, shows, valuation tools, speciality content and a trading platform.

The business lacks the technical savvy of LiveTrade and Masterworks, but it conveys a warm feeling to hobbyists. The shares have outperformed other SPACs by trading at $10, in line with their starting price, although they are below the post-float peak of $18.50, seen in December 2021. They value the company at $3.33 billion.

These initiatives, and more, are likely to encourage more investors to view collectables as alternative investments. They will produce greater transparency and lower costs, at risk of generating excessive speculation in one direction, or the other.

And don’t imagine the process of reinvention is over.  Sam Bankman-Fried has raised $1.8 billion for FTX Exchange, his crypto trading company, from top investors ranging from Iconiq to Sequoia. He has bought a separate 7.6% stake in Robinhood, the share trading platform.

Bankman-Fried likes to innovate. He recently said his clients should have derivatives trades entirely executed by his computers, bypassing other financial intermediaries.

As part of the deal, algorithms would be used to monitor trades, adjusted for margin requirements. It all sounds a bit technical, but the loss of business would cost Wall Street a great deal of money, if regulators allowed the approach to be applied to mainstream markets, to the potential benefit of clients. 

And if it wasn’t for the money provided by family offices, none of this would be happening. 

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