Owning passion assets, which could be fine arts, cars, watches, wine, rare whiskey or actually any other type of such financially illiquid asset, is fulfilling and a nice asset in the balance sheet. However, those passion assets come all with one big disadvantage: being illiquid. And not only this, they also come with additional cost and administrational effort for the owner of these passion assets, e.g. insurance, alarm systems, secure storage etc.
Securitising a passion asset is therefore an excellent solution to turn the illiquid asset into cash without having to ultimately part from the asset as in case of an outright sale.
Let’s take an example and have a closer look at fine arts. During the pandemic, museums and galleries were suffering from short comings of visitors and hence the income generated made through e.g. ticket sales, events and sponsoring. Selling art may not have been an option to generate liquidity, for a multitude of reasons. Through securitisation of a piece of art the investors that acquire a note virtually acquire a fraction of the artwork while it can physically remain with the seller. Depending on the structuring it may even eventually go back to the seller.
How to securitise passion assets – fine art
Coprolin establishes a cell that issues notes to qualified investors. With the revenue generated from the sale of the notes, the cell buys the artwork from the owner (who is therefore the originator) and becomes the legal owner of the art. The cell safeguards it, takes care of all administrational and financial liabilities, lends it to galleries or museums, and ultimately sells it, ideally with a profit, to a new collector, another investor or back to the originator.
During the lifetime of the cell, its investors thus own indirectly a piece of the artwork.
But not only galleries, collectors or museums might consider the securitisation of an artwork, but also a family, in order to divide the ownership amongst the family members. This way, each member owns the artwork without dismantling the collection.