In 1962, shortly after recording “Love Me Do” at Abbey Road, The Beatles signed a pressing of the song. John, Paul, George and Ringo proudly scribbled their names in blue ballpoint pen on the paper label. It was their debut single.
And last month, you could buy shares of it.
Owning part of an original Beatles autograph would be the ultimate party brag, but the nostalgia factor wasn’t what made it a good opportunity to invest. The analysts at Alts recommended it because the market value was $24,000, and they knew a signed version of the record’s B-side — the much less popular “P.S. I Love You” — had recently sold elsewhere for $22,400.
Based upon this and other research, the Alts team decided the valuation for “Love Me Do” was strong. Because the item was likely to appreciate, they suggested buying in now.
“Cultural assets continue to ping-pong around the 60% to 70% mark for the year,” they wrote in a Dec. 7 newsletter update. “With three trading weeks to go, they’re set to be one of the, if not the, best performing asset categories of 2021.”
Alts, which calls itself the largest alternative investing community on the internet, excels at this sort of analysis. From video games to farmland to decades-old Beatles records, the Alts team says it dives deep on opportunities to invest in various assets in order to uncover “undervalued, mispriced and hidden gems.”
These alternative, or exotic, assets are driving an increasingly popular subgenre of investing. A handful of converging factors have made people realize you don’t have to stare at complicated candlestick charts all day in order to invest. Democratization, fractionalization and technological advances are making nonstandard assets like collectibles more accessible — and Alts aims to help new investors navigate it all.
Investing can be fun, especially when you’re putting your money into things like wine, comic books or meteorites. But it can also be tricky. The field is hugely varied and quickly evolving, and that means you have to do your homework.
“We’re in this early adopter phase where it’s exciting and, wow, you can invest in this card and that baseball, and that’s really awesome. But the worst way to invest is emotionally,” says Alts co-founder Stefan von Imhof. “So we take the emotion out of it. We do the hard work that no one else is doing.”
Alternative assets: A lifestyle investment?
When people talk about traditional assets, they’re generally referring to stocks and bonds. When they talk about alternative assets, they’re usually referring to hedge funds, private equity, real estate and commodities.
But according to Kevin Mirabile, author of Exotic Alternative Investments: Standalone Characteristics, Unique Risks and Portfolio Effects, that scope has expanded in recent years. Investors have flocked to affinity assets like artwork, Bitcoin and vintage cars because they’re emotionally or culturally significant items they can relate to.
“Millennials think about investments that are more aligned with lifestyle,” Mirabile says. “That has put a lot of these asset classes on the map.”
At the same time, investors are seeking assets with returns that aren’t correlated with stocks and bonds. Owning assets whose value tends to rise when other assets, especially stocks, fall can help you build a diversified portfolio.
Alternative assets give investors a chance to do that. As JPMorgan Chase’s Anton Pil wrote in a 2020 report, “alternatives, perhaps once considered optional in investors’ portfolios, have indeed become essential.” The Chartered Alternative Investment Analyst Association found that alternative investments grew from 6% to 12% of the global investment market between 2003 and 2018.
“The infrastructure is evolving, and that has moved some of the investors from just individuals who can relate to the asset class to investors who want it for financial characteristics,” Mirabile adds.
Investing in alternative assets requires a lot of legwork. That’s why Mirabile says they tend to be popular among entities with ample resources that can analyze opportunities. Individuals may face more of a hurdle because there’s so much labor involved in advance of buying these items.
“Even if you want to buy a Mickey Mantle baseball card, you have to figure out which one,” Mirabile says. “All of these investments require a fair amount of research by the buyer — and due diligence.”
The rise of the Alts community
Enter Alts, started in 2020 by von Imhof and Wyatt Cavalier.
They noticed people were increasingly educating themselves on how to invest as opposed to paying someone else to pick investments for them. It coincided with a proliferation of startups focused around fractional investing, or buying an affordable piece of an assets instead of paying a lot for the whole thing.
“There’s dozens upon dozens of fractional platforms that allow you to fractionally invest in everything, from art to wine to sports cards to sneakers to video games to islands … the list just goes on and on,” von Imhof says. “There’s no upper limit to what can be invested in and fractionalized.”
The sheer volume of opportunities can be intimidating to amateurs. Cavalier and von Imhof saw an opening for a Seeking Alpha-type community that would do the analysis for them and provide recommendations, boiling hours of research down into easy-to-understand reports.
The Alts investing community is primarily newsletter-based; it has more than 18,000 subscribers. After signing up, people are directed to choose their asset preferences from about 30 categories, including domain names, NFTs and racehorses.
The emails arrive a handful of times a month. Packed with charts, links and friendly commentary, they’re reliably fascinating reads even if you’re not actively looking to spend $52,000 on a version of the Bible that went to space.
Alts emails share facts about things you weren’t even aware existed, much less own a share of them. Like, did you know there’s no universal grading body for Hot Wheels cars? Or that you can buy futures for wines that are still in the barrel? Or that Batman actually showed up as a character in a different comic book series before getting his own?
Alts also has a members-only section of its website that gives unrestricted access to its reports. These Insider accounts, which cost about $20 a month after a free trial, get those coveted “buy” and “pass” recommendations.
The content is constantly updated and highly detailed. For example, if they’re looking into a LEGO set, von Imhof says they interview experts to answer questions: “Who are the sellers? Who are the buyers? What are the market dynamics? What makes the LEGO set valuable? And then the mechanics of how do you actually invest in LEGOs? Where do you look? Has that been fractionalized?”
Then they make a suggestion on what to do.
The “Love Me Do” autograph, for example, was a buy. A copy of the 1988 Nintendo Entertainment System game Super Mario Bros. 2 was a pass due to “high valuation and uncertainty.”
The pros, cons and future of alts
Succeeding with alternative assets isn’t quite as simple as finding an opportunity to invest in a pair of sneakers Magic Johnson wore in 1987 and pulling the trigger.
Because each asset is unique, it’s difficult to pinpoint value. Mirabile says a lot of the time you’re using data from its last trade — but the last trade doesn’t always match with the item’s current value. Basically, you often don’t know how much something is worth until you sell it.
Aaron Filbeck, managing director at the CAIA Association, points out that you’re also at the mercy of changing consumer preferences. Fluctuations in demand can dramatically influence price. Filbeck points out that esoteric assets can be volatile.
Because of this, financial experts say you need to be properly educated before you hand your money over. Moderation is also key. Arthur J.W. Ebersole, a certified financial planner in Wellesley Hills, Massachusetts, says he advises clients to devote no more than 5 or 10% of their net worth or portfolio to alternative investments.
But despite the challenges they present, these assets can be exciting because they lower the barrier to entry for new investors, just like trading apps and social media have leveled the playing field. A person who struggles to wrap their head around, say, municipal bonds may be more motivated to invest in an action figure of Star Wars‘ Obi-Wan Kenobi.
To capitalize on this, von Imhof says Alts is planning to launch a number of blended funds with themes like the 1980s. It recently started a Discord and closed a $1.5 million funding round. The subscriber list is growing every day, and von Imhof says he’s got a 26-page list of ideas to explore.
“It’s literally impossible to run out of stuff to talk about,” he adds. “Once you understand the market, you understand how to get an advantage.”