Fractional investing in real assets is a new concept. As a result, we often get asked how we do it and how it works. In this blog post we will tell you everything you need to know about what happens in the background when we put assets up on the Koia platform and how the process works for you as an investor.
The first step before listing any asset on the Koia App is sourcing the right assets. Currently, we only source from professional sellers with strong track records and warranties to ensure provenance and authenticity. Where required we also verify with an independent third-party.
We have a data-driven approach as to how to source assets, looking at a number of factors such as liquidity, rarity, brand equity and relative value.
Once we’ve sourced assets we want to acquire, the next step is to store them in an appropriate storage facility. Assets are stored in different facilities, based on their storage requirements..
Wine, for instance, is stored in bonded storage facilities that ensure correct lighting, temperature and humidity. Since there are only a small number of specialist storage providers in this market, it sometimes means that after the wine is acquired, it never leaves the warehouse and simply gets moved to a new section and / or gets put under the new owner’s name. Small high-value items such as watches or trading cards are stored in secure safety deposit boxes. For security reasons, we can’t disclose the exact location of some assets.
Another frequently asked question is how the process of fractionalization actually works.
We mint non-fungible tokens (NFTs) called ‘Fractions’ which are linked to the real asset. Each asset can have hundreds or thousands of unique Fractions which can be collected, traded and enjoyed.
A Fraction is a unique digital token, often referred to as a non-fungible token (NFT). Each Fraction is a unique digital asset linked to real-world assets on the Koia platform, such as a watch or collection of whisky bottles.
As a holder of a Fraction, you are entitled to vote on key decisions related to the underlying asset. For example, you can vote on whether to sell the underlying asset and at what price. Owning a Fraction is very similar to co-ownership, however, in this case you only become the legal owner of the asset if you own 100% of the Fractions.
The number of Fractions minted will depend on the value of the underlying asset. The number of total Fractions issued will be visible in the Koia App and will not change over time.
After you buy your fraction you will of course want to keep track of its performance. An important thing to note is that alternative assets such as fine wine or watches do not work in exactly the same way as stocks.
For items such as fine wine that get traded frequently, there is a relatively high volume of data available and we can be fairly confident that if an often traded wine was last traded for, say, €11,000 a similar price would be obtained if putting it up for sale today. With very rare items that only get sold via auction, we’d display last sales data but there is no guarantee that the exact same price can be obtained if putting the item up for sale today and it can be either lower or higher. The latest price date would, of course, provide an indication of where the market is going and whether it is trending up or down. We get our data from a variety of sources, such as marketplaces and merchant data and auction houses.
As a rule of thumb, the more unique or rare the item is the less accurate the estimated value will be.
There are two ways in which you can sell the asset. The first is when the asset gets sold as a whole to a new buyer. Given that most alternative assets are long-term investments, we’d expect that in most cases this would only happen after a number of years. Offers from potential buyers would be put up for a vote and users that invest in the item can have their say in whether to accept or reject the offer.
You can also sell your Fractions via our secondary marketplace, which is coming soon. Lastly, you will also be able to take their Fractions outside of the Koia Application and trade on third-party NFT marketplaces.
At Koia, we allow you to buy, trade and collect fractions of iconic assets, starting from $60. Our experts make sure to source and buy the best assets, and we take care of authentication, storage and insurance. All of the benefits, with none of the hassle.
The articles and information made available on Koia are provided for information and educational purposes only and do not constitute financial advice. You are advised to consult with an independent financial advisor for advice on your specific circumstances.