The business of collectibles is frequently considered to be about hobbies and personal interests. What most of us in the collectibles space can tell you is that the collectibles space has been moving toward the investment space for years. A new effort is going to create indices to track “cultural assets” which will create returns for categories within the collectibles space. This effort has some very obvious benefits for the collectibles community. It will also have some drawbacks that we will address.
Yahoo Finance & Pricing Culture
Yahoo Finance is launching a cultural asset index to offer up-to-date information on the collectibles space. The company noted that this will offer investors insight on a different way to diversify their portfolios with cultural assets. The effort will be in a partnership with Pricing Culture and the indices will track cultural assets which are available for fractional ownership.
According to the press release, the Total Collectables Index is the best gauge of the fractionalized collectables market of SEC-registered cultural assets. Sub-indices are to be market-cap weighted and will consider each cultural asset category available on the leading investment exchanges for securitized collectables.
Collectors will now be able to track categories within collectibles on a finite measurement of fractionalized asset categories. As of the current time, there are close to 1,000 fractionalized assets being tracked and their total market capitalization is nearly $500 million and is growing fast.
The collectable asset page includes the alternative asset platforms Otis, Rally Rd. and Collectable and includes lists of component assets and where they can be bought and sold. The Total Collectables Index can be found at https://finance.yahoo.com/quote/%5ECLCTBLS.REGA on Yahoo Finance.
The website for Pricing Culture uses search, profiles and pricing data. The search feature allows users to find assets by listed exchange, share price range, and asset type. The profiling has images, descriptions and share statistics and the pricing includes price history and the status of each asset. The press release for the announced indices shows 11 sub-index categories, as follows:
- Trading Cards,
- Sports Memorabilia,
- Securitized NFTs,
- Comic Books,
- Card Games,
- Video Games,
- Luxury Goods,
- and Wine & Spirits.
Joanna Lambert, President and General Manager, Consumer at Yahoo, said:
We are excited to announce the first cultural asset ticker for Yahoo investors. Diversifying a portfolio with cultural assets is continuing to drive interest with investors and it’s no surprise digital collectables are making headway across finance, sports and more. Yahoo is the first in the market to list a cultural asset index, furthering our mission to give investors the tools that they need to make wise decisions.
So, what are the potential problems here?
This will be a very interesting attempt and listing “problems” should not be considered as only bad attributes or flaws. If you have been around collectibles of any kind for many years (or decades) you have probably seen firsthand that there are many inefficiencies and nuances that have to be dealt with.
Measuring real returns in any category of collectibles is going to be quite tricky. Including only what occurs on fractionalized assets will miss a very large portion of the assets. There are many auction houses which sell these assets to collectors (and investors), and some of those same assets then end up being for sale on fractionalized platforms. This will also miss the entirety of what happens at collectibles conventions and in private transactions where some of the largest transactions occur.
There are other indices that have been around longer. The PWCC Marketplace has 5 different indices it has compiled with data going back to 2008. These are returns tracking their auction sales of PSA-graded cards from pre-2000 issued cards, which leaves modern era cards and their wild price moves out of the calculations. These indices are frequently referred to by outside sources which compare collectibles to equity market returns.
Pricing Culture’s website also comes with the disclaimer that their data is provided for informational purposes only and is not intended for trading or investing purposes. Again, this is not exactly a “problem” because every website in this space has disclaimers that they are not offering investment advice and that past performance does not imply future returns.
While tracking fractionalized assets may be much more representative of “a market” in these larger numbers, using fractionalized trading platforms can be quite tricky. Many assets being offered 9and trading windows) are missed because of communications issues, the time of day, time away and more.
Each one of the main platforms offers some post-IPO trading features for assets but these are sometimes very illiquid and may have less than $100 worth of bids or asks at any given price point. In some ways, these fractional platforms feel more like trading over-the-counter stocks rather than fully listed stocks on major exchanges. Still, many of these platforms are still quite new and they all have their own plans to grow and mature.
Another issue to consider is that fractionalized assets often trade at prices which are not reflective of what an asset might sell for in its entirety. These can sometimes be at discounts, but they can also represent significant premiums over the last sale and what buyers are willing to pay at any given time. Another issue to consider is that fractionalized assets may even be at different implied valuations from one fractionalized platform to another.
Some of the assets that have been fractionalized will automatically have very inefficient prices from the start. They may be valued at multiples higher than their last recorded sales price, and the price of the underlying assets may rise or fall based solely on a very low volume or dollar amount of shares being bought or sold.
Most of the fractionalized ownership platforms are also targeted toward mobile platforms. Many of the email notifications that are sent out end up in Spam and Junk boxes for a myriad of reasons, even if the users have received dozens of emails from the same sender. This is a source of frustration by many platform users we have spoken to about their experiences. And some assets and notifications are simply not seen on desktops and laptops where tracking multiple investments is much easier and more efficient.
Many categories within the collectibles space are not being tracked here. Watches and jewelry are not included, likely due to liquidity and frequency of recorded buys and sells. Stamps, coins and paper currencies are not mentioned. Art is not included, also likely due to liquidity and frequency of buys and sells.
Again, identifying “problems” should not be considered “bad” by any measure. There are just going to be certain limitations that naturally occur. It will be quite interesting to see how this all plays out in the months and years ahead.