Asset Fractionalisation: A new dimension in asset exploration and price discovery

The concept of Asset Fractionalisation isn’t novel. Investors have been doing that for years, in equities, commodities and even crypto. Here, we explore the idea of Asset Fractionalisation in Niche Asset Classes like Fine Art, Vintage Wine, Real Estate, Luxury Timepieces, Bags and even collectible figurines and Pokemon cards.

Now, why is this such an intriguing space that few have thought of exploring and what can we achieve by introducing asset fractionalisation in these asset classes? Furthermore, how do we do it?

The common denominator we find in these asset classes and the fundamental reason why we need to fractionalise these assets in the first place is because these are high value assets that are too expensive for the common investor to commit to. If you had $100K, would you invest it in a Case of Vintage Merlot or a PSA10 Charizard? Probably not.

Liquidity
In every investment, your exit liquidity is key. When your investment appreciates, taking profit turns your paper gains into real monetary gains. Especially for niche asset classes, finding a buyer at the right price at the right time is a huge challenge.

It may take days, months, and even years to find someone who is interested in, and able to afford that Limited Edition Patek Phillipe. While the availability of secondary marketplaces like Ebay, Craigslist and other platforms have made this easier, there still remains a huge void of volume and exit liquidity for sellers.

Price Discovery and Volatility
So even if you are able to find a buyer, what is the right price for you to sell your item for? As most of these sales are done privately / OTC, there are little records of past sales or price movements in these asset classes. You can buy a second hand Birkin in the US for $10K, but that same bag would probably go for $15K in Singapore.

While this just causes consumer frustration (especially if you sold your asset way below market price), having a platform that allows better price discovery builds a fairer market in the long term and significantly reduces price volatility.

Market Information
Adding on to the Price Discovery conundrum, there remains a lack of Market Information for these asset classes. It is imperative to make an informed decision at any point of investment.

Just like any equity investment, an ideal scenario would be to have information like price charts, past transactions, buy/sell demand volume to aid in your investment decision. Every investment is a risk, and this will allow you to make a more calculated risk before putting down your hard earned money.

So, what next?

While we are still early in exploring the world of fractional assets in newer asset classes, we are certainly on the right track. The development of blockchain technology, cryptocurrenncy, NFTs and greater levels of regulation globally has aided many businesses in building out more robust marketplaces and systems.

Building out these solutions will allow investors globally to explore and invest in newer asset classes more easily, giving them options to diversify their portfolios and participate in the growth of these assets. We seek to make information more readily available as well.

Through asset fractionalisation, we introduce a huge amount of fresh liquidity and volume into these markets. A secure, regulated marketplace for investors to comfortably invest in will help sellers find the exit liquidity they need. With more transactional volume, we will be able to further provide investors the right investment information they need.

Utilising Blockchain technology allows us to track and record all these transactions securely, and NFTs or ERC20 tokens provide a representation of each fraction, allowing them to be securely traded on marketplaces.

The market is starting to ripen and interest is growing for asset fractionalisation, let’s keep building.