[Feature] From cows to Rolex, young investors in Korea eye new alternative investment

High liquidity in the market has led some young retail investors on relatively small budgets to look into unconventional, and perhaps “fun,” ways of investing. By joining fractional investments in such areas as livestock and limited-edition Rolex watches, they expect somewhat stable returns, rather than entirely relying on volatile stock markets or cryptocurrencies that carry higher risks, according to industry insiders.

What makes this new way of alternative investing possible are the digital platforms developed to raise funds and purchase tangible assets that are anticipated to gain value some time later, they say.

For instance, Bancow, a platform for investing in cattle acts as an intermediary for investors and farms seeking to buy and co-invest in calves. After about two years, full-grown cows are sold at auction and the two investing parties share the profit.

According to the company, the investing parties are largely divided into two groups -- investors and farmers. The more money investors pour into a cow, the more shares they hold. Meanwhile, farmers chip in for breeding costs. Farmers who pay for A-class fodder are given more shares than others.

The price of calves, usually around 4 million to 5 million won ($3,500-$4,300), depends on whether a cow can inherit genes with more desirable traits such as strong muscles that turn into a high quality of meat. Bancow expects a profit rate of approximately 19 percent. If an investor holds a 1 percent share of a cow at 40,000 won, the investor could earn roughly 7,600 won.

“The MZ generation are tired of worrying whether they lose money overnight in stock or cryptocurrency trading because the price goes up and down like a roller coaster. It has come to my attention that some of them prefer a rather stable investment in ‘tangible assets’ with guaranteed profit,” said Ahn Jae-hyun, CEO of Bancow.

The term “MZ generation” refers to millennials and Generation Z, together encompassing those born from the 1980s forward.

Ahn explained that cattle prices are likely to keep pace with inflation in the long run. “The domestic livestock price index has already risen to 18.4 percent in April compared to last year and the price will surge for more than 18 to 30 months,” Ahn said.

“Also, since the probability of cows getting the top three out of five muscle grades is up to 88.8 percent, profit is pretty much guaranteed after two years,” Ahn added.

Departing from the cattle field, young investors also seek profits in rare luxury goods. Although it is difficult to purchase watches that can cost more than 20 million won on their paychecks, investing in an item partially is possible.

Piece is a local platform that seeks fun in investing by providing profit opportunities in Rolex watches. It combines a variety set of Rolex pieces and gathers investors. They can invest from 100,000 won to 20 million won, and they potentially gain returns after pieces are sold six months later.

Piece completed the first investment project of 11 Rolex pieces in April. They include the Rolex Oyster Perpetual, Cosmograph Daytona, Datejust with a green dial and the newest edition of the Submariner. The collection includes the most popular and rare Rolex pieces, the company said.

According to the official, it has already sold the pieces and raised the expected profit. Although the official did not disclose the exact profit rate, investors who hold ten shares worth 1 million won are expected to receive profit from 220,000 won to 240,000 won in October.

“The MZ generation shows much interest in owning and investing in luxury brand products. So we offer them investment opportunities that cost small amounts of money. The reason we chose Rolex is that it is one of Koreans’ most loved luxury brands,” a Piece staff said.

Demand in investing in “bits and pieces” has been higher than expected.

Bancow’s first investment project in May sold out in 12 days, raising up to 10 billion won. Nearly 83 percent of Bancow’s investors were in their 20s and 30s. Piece’s second project in June sold out in just 45 seconds.

Experts say that the investment trend is showing a paradigm shift from the affluent investing in traditional assets to small investors chipping in to buy out shares -- bits and pieces -- of nontraditional assets.

“Due to the ultralow interest rates in the country, it is impossible to earn interest by saving money in the bank like old times. Investing in high-cost real estate is hardly an option for them. So they are looking for alternative investment options,” said Gwon Se-hwan, analyst at KB Financial Group Research Center.

“Also, thanks to platform transactions sparked by highly developed digital technology, the digitally native MZ gen is easily adapting to and even leading the latest investment trend,” he added.

But concerns loom over the new investment methods.

Unlike traditional financial goods and services that are overseen by the relevant authorities, such “fun” platforms where the size of investment is small operate mostly outside of legal boundaries.

Bancow, however, say the company observes internal protocols for investor protection.

“If cows die of foot and mouth disease, the government gives a 100 percent reimbursement,” said Ahn of Bancow.

“Investors can also get a refund when cows die due to breeder’s negligence. Basically up to the point when cows fully grow, investors are guaranteed to exit.”

By Byun Hye-jin (hyejin2@heraldcorp.com)