Blockchain start-up embraces ‘passion investors’

A 1957 Ferrari 250 Testa Rossa- the object of many desires but few pockets are deep enough Keystone

Have you ever dreamed of driving a vintage Ferrari or calling an expensive oil painting your own but could never afford it? A Swiss blockchain start-up plans to democratise luxury for people who dream of investing in their passions.

Marco Abele, former chief digital officer at Credit Suisse, is one of a growing number of bankers to jump ship from a cosy job in the traditional financial world into the choppier waters of fintech (financial technology). Next month, his start-up TendExternal link will launch digital tokens, each representing a share in the value of luxury items.

Holders will be entitled to a percentage share of a luxury good – be it vintage wine, watches, furniture or other high value items – which gives them both access to the objects of their dreams and a potential profit once they sell the tokens.

“The idea came when I started to really study our customers and found that 80% did not want financial products,” Abele told swissinfo.ch. “Funds and stocks can be volatile and are very impersonal for investors; they have no relationship with these products. I wanted to see if there was an alternative.”

Abele believes Tend could become a CHF200 million-CHF300 million ($200 million-$300 million) pre-tax revenue business in the long-term. 

Passion investing is already popular among the ultra-wealthy, allowing them to diversify their investments while attaining exclusive status symbols for their own pleasure.

Money-spinner

Even rare and precious objects can lose value or be subject to some volatility, but the quarterly Luxury Investment IndexExternal link from British-based consultancy Knight FrankExternal link points to many passion investments outperforming financial markets over the long run.

Knight Frank Luxury Investment Index Q2 2017

Tend is aimed at relatively wealthy people with spare change of between CHF100,000 and CHF1 million – so democracy only goes so far. Abele believes this wealth segment is being pushed out by larger banks, while smaller institutions lack the know-how to fully meet their needs.

So how does it work? Clients pay a fee to subscribe to the platform and submit a wish list of luxury goods they would like to get their hands on. They pay by buying tokens based on the cryptocurrency ether. Each token is a digital contract that entitles its owner to a share of a specific item and is stored or transferred on the blockchain.

Tend sources and buys these items on behalf of the customer, arranges their storage and care and organises a roster for each part-owner to enjoy them. In addition to the subscription fee, clients would bear the cost of storage and maintenance of their goods.

The proof of the pudding will be whether relatively wealthy people are willing to share their passions with others, according to Andrew Shirley of Knight Frank. 

“It’s an interesting concept, but it remains to be seen if it will gain traction,” he told swissinfo.ch.

Big markets elusive

Tend also faces competition from established luxury goods investment pools such as passioninvestors.com. Abele says his blockchain platform is different because it allows clients to get their hands on their investments and enjoy them.

Abele has taken the unusual route of issuing Tend tokens as bond-like securities and wants to register his company with the Swiss financial regulator as a financial intermediary. 

“We’re applying today’s technology to existing rules,” he said. “If you want to build a long-term business, you need to be compliant from the start.”

But therein lies a glitch to obtaining global market share. Tend tokens will not be promoted in the United States, China or South Korea, where the authorities have placed restrictions on token securities. Despite the loss of those three huge markets, Abele remains upbeat about the prospect of attracting a critical mass of clients.

“If you consider that 350 million people own $100 trillion of the world’s wealth, this is a huge band that will be sufficient,” he said.