[MZ Art Tech]② "Artworks as Safe Assets, Sharing the Value of Pieces with Buyers"

Interview with Kim Hyungjun, CEO of Art Sculpture Investment Platform Tessa
"Art Competitiveness Equals Company Competitiveness, Selecting Investment Works with Strict Criteria"

Kim Hyung-jun, CEO of Tessa.

[Asia Economy Reporter Kim Heeyoon] “When buyers discover blue-chip artworks, considerable prior study of art is required. Therefore, we select investment pieces based on the transaction history of global auction institutions, the annual number of auction transactions, and the average annual auction transaction amount.”

In the drama The Youngest Son of a Conglomerate, Mohyunmin (played by Park Jihyun), who appears as Chairman Jinyangcheol’s son-in-law, runs a gallery. Until the 1990s, it was common for the wives of chaebols to manage galleries, and art was often used for money laundering and slush fund creation through high-priced art transactions, so artworks were perceived as exclusive to the wealthy. Breaking this prejudice, various services have emerged allowing anyone to purchase art, and the MZ generation has focused on fractional investment. Kim Hyeongjun, CEO of the art fractional investment platform Tessa, explained, “While artistic value is important, we present artworks that can be evaluated as assets to MZ generation buyers who view art as an investment asset.”

For the MZ generation focusing on art investment, the high prices of artworks posed a barrier. Fractional investment broke down this barrier by dividing ownership of physical assets such as buildings or high-priced artworks into shares and selling them online. This method allows multiple buyers to jointly purchase ownership of ultra-high-priced artworks worth hundreds of millions to billions of Korean won. With the advent of fractional art investment opening the door to small investments, many MZ generation individuals seeking new financial technologies flocked to it. CEO Kim said, “Initially, users in their 20s and 30s flocked because it was possible to invest in works by domestic and international masters like Marc Chagall, Banksy, Yayoi Kusama, and Nam June Paik for as little as 1,000 won. Recently, the membership has rapidly expanded to include people in their 30s (33%), 40s (28%), and over 50s (13%), making art investment more popular.”

Amid increased volatility in global financial markets due to the U.S. Federal Reserve’s interest rate hikes and Russia’s invasion of Ukraine, CEO Kim analyzed that the market would maintain its current state this year. “Art investment inevitably is influenced by asset markets, and as major collectors have been watching the market, growth has slowed,” he said. “When the U.S. steps back from big rate hikes and enters a market adjustment phase, the first half of this year will actually be the best time to purchase artworks.” He added, “Long-time collectors see this as a good market for ‘picking up bargains,’ and capitalists continue to purchase art. However, while blue-chip artists remain solid, the emerging artist market may undergo further adjustments.”

Banksy's 'Love Let' sold by Tessa. Photo by Tessa

Since its launch in March 2019, Tessa has recorded 128,000 subscribers and a cumulative art sales total of approximately 32 billion Korean won. Tessa only purchases and introduces works by domestic and international blue-chip artists such as David Hockney, its first traded artist. CEO Kim explained, “The selection of investment pieces is done by Tessa Asset, a 100% subsidiary of Tessa, through its art research team based on data. We apply strict criteria such as annual auction transaction amounts exceeding 10 million USD, more than 100 annual auction transactions, a failure rate below 30%, transaction history with global auction institutions, and ranking within the top 200 artists worldwide.” He emphasized, “Although 30% of Tessa’s members are customers unfamiliar with art, our role and strength lie in carefully selecting artworks as stable investment destinations based on data.”

Globally, fractional investment companies are gradually expanding their presence in the art market. The U.S. art investment platform Masterworks recorded cumulative sales of 400 billion Korean won in the first half of last year and set an annual cumulative sales target of 1 trillion Korean won. The company has become a VVIP client of conservative auction houses like Sotheby’s and Christie’s. This marks a shift in the art world’s initially negative view of fractional art investment. CEO Kim said, “In the early days, we purchased works from a gallery in the UK and proceeded with sales, but later received protest emails from gallery officials who said they would not have sold the works had they known about this business model. However, as our data-based criteria for selecting blue-chip artists and sales performance have been gradually recognized, we now have cooperative relationships with famous global auction companies.”

Building on these domestic market achievements, Tessa is pursuing overseas services. Initially, Tessa attracted attention for its patented blockchain distributed ledger technology that prevents hacking and data forgery while publicly and managing artwork ownership status and transaction history in real time on the blockchain. Using this core technology, Tessa is expanding into Hong Kong, Singapore, Japan, and Italy. CEO Kim said, “Since the art fractional investment platform’s system stability has been recognized in the global market, we believe Tessa’s technology will also be accepted overseas. Currently, artworks purchased by Tessa are loaned free of charge to local governments, contributing to the popularization of culture and art. In the future, through the popularization of art investment, we will continue to diversify the experience of purchasing artworks.”