After Music and Real Estate, People Are Now Buying Hanwoo in Shares... Is 'Fractional Investment' Safe?

Small Investments in Music Copyright, Real Estate, and Hanwoo Beef
Financial Authorities Judge Musicow Products as 'Securities'
Attention on Whether to Expand Application to Other Fractional Investments

Photo by Musicow.

[Asia Economy Reporter Heo Midam] Fractional investment, which involves buying and selling high-value assets such as artworks in shares, is gaining popularity among small investors. Fractional investment is a method where assets like artworks, music copyrights, real estate, and Korean beef are divided into shares and multiple investors invest jointly. However, caution is required as investor protection measures are often insufficient. Most fractional investment platforms are not registered as financial investment firms under the Capital Markets Act, making it difficult to protect investors in case of company bankruptcy or other incidents.

Fractional investment has attracted attention mainly from people in their 20s and 30s with relatively small assets, as it allows them to hold and trade shares of high-value assets with a small amount of money and earn profits through trading.

A representative example of fractional investment is music copyright investment. 'Musicow,' considered the largest fractional investment platform in Korea, allows investors to purchase copyrights of specific songs in units of one share, similar to stocks. Investors receive royalties from performances, YouTube, and other sources as dividends. The more the music is played, the higher the returns.

There is also fractional investment in tangible assets. The real estate fractional investment platform 'Casa' was designated as an innovative financial service by the Financial Services Commission in 2019. It is a platform for trading Real Estate Digital Asset-backed Securities (DABS), which securitize building values into shares for buying and selling.

Investors can aim for capital gains when real estate prices rise in the future and expect profits from real estate sales. Since investors do not directly own the real estate but own securities representing the building's income, there is no tax burden such as acquisition tax, capital gains tax, or comprehensive income tax associated with owning and trading real estate.

There are even products that allow investment in Korean beef. The Korean beef asset platform 'Bankau' connects consumers and farms. Investors jointly purchase six-month-old calves with a minimum investment of 40,000 KRW. The farms raise the calves and then auction them, sharing the profits with investors. In other words, when the calves grow into mature cattle and are sold, profits are divided according to the share ratio.

However, investor protection measures for fractional investment platforms are still insufficient, requiring caution. Most fractional investment platforms are not registered as financial investment firms under the Capital Markets Act. This means that investor protection regulations are unclear in case of any incidents. Additionally, fractional investments are highly volatile, and it is difficult to predict how much profit will be made at the time of investment. Investors can only estimate based on the average returns provided by each platform.

Therefore, attention is focused on whether the recent decision by financial authorities that Musicow falls under securities business will be expanded to other fractional investments.

The Financial Services Commission and the Securities and Futures Commission previously ruled on the 20th that the copyright royalty participation claims sold by Musicow are "securities." The core point is that Musicow's products are financial products similar to stocks and thus must comply with the Capital Markets Act regulations. Accordingly, Musicow cannot launch new products until it restructures its business model and establishes investor protection measures.

Other fractional investment platforms such as Bankau (Korean beef), Tessa (artworks), Peace (luxury goods), Twig (supercars), and Treasurer (wine) are also under pressure to immediately devise and strengthen investor protection measures.

Experts pointed out that investors need to approach fractional investment cautiously. Senior Research Fellow Lee Hyoseop of the Korea Capital Market Institute said, "There is a possibility that fractional investment platforms will be recognized as securities businesses only if they meet the securities criteria." However, he added, "Since the underlying assets are highly volatile and investors bear the risk of market value decline, option investments in intangible assets should be approached carefully."

This content was produced with the assistance of AI translation services.