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Investing in art is easier said than done. Not only do you need to understand the art market, trends, popular artists and more, but also you often need to have significant capital to buy your own painting.
Purchasing a piece of art outright can cost in the millions of dollars!
Of course, there are many pieces below that threshold, but for the large majority of art that brings significant returns, the cost can push away most investors.
In today’s environment of empowering the average investor, companies are striving to make investments both easier to understand and access. While many of these platforms focus on more traditional investments, there really isn’t much for the art world.
That changed with Masterworks in 2017. This platform has truly opened art investments to everyone.
So, how does Masterworks work? Can you really make any money investing in art?
In this complete Masterworks review, we answer those questions and more. Let’s get started!
Why Invest In Artwork?
Investing in artwork offers investors a few key benefits:
- Diversification. Most investors have stocks and bonds in their portfolio. These assets are most popular for obvious reasons. However, in times of market uncertainty, these assets are subject to high volatility. Investing in alternative investments like art can provide investors with a great way to diversify their portfolio. Art has not historically followed the ups and downs of the stock market. Therefore, art can be a great way to hedge losses during uncertainty.
- Strong Returns. Art has historically performed right on par with the S&P 500. Read more about art market returns in our article here!
- Inflation Hedge. In addition to diversification, art provides a hedge against inflation as it is a tangible asset.
- Enjoyment. Many investors that have art in their portfolio do so because they have a passion for art and truly find enjoyment in owning iconic pieces of work.
What Is Masterworks?
Masterworks was the first platform to allow investors the opportunity to purchase shares in iconic artwork.
Rather than purchase a piece of artwork for hundreds of thousands of dollars, you can instead purchase shares, much like fractional share investing in stocks.
“Contemporary art has outperformed the S&P for the past 25 years, but there has been no way to invest in it. Masterworks is the first company to offer investment products within the art market.” – Scott Lynn, Founder and CEO of Masterworks
The reality for many years, and still believed by many, is that art as an investment is just for the ultra wealthy. With Masterworks, anyone can get started.
As long as you are 18, then you are eligible to get started. Additionally, they have a low minimum investment of $500.
The price for a share of a piece of art depends on each offering, though oftentimes this share price is as low as $20. A huge plus of the Masterworks platform is that investments are not limited to accredited investors.
Since inception, Masterworks has attracted over 550,000 members. Additionally, they have acquired and securitized over $680 million worth of art.
They currently have a 4.8 average star rating in the app store.
Invest In Artwork Today!
|$2,500||View Investments||Prism Fund (Includes Artwork), Build Your Own Portfolio|
|$500||View Investments||Buy Shares Of Blue Chip Artwork|
|$0||View Investments||Stocks, ETFs, Crypto, Alternatives (Including Art & NFTs)|
How Does Masterworks Work?
The platform works in a four step process.
- First, they conduct heavy analysis to determine which artists have the most momentum in the market. Their research team uses proprietary data to select which artists they want to invest in.
- Second, Masterworks actually purchase art. With various artists selected, their acquisition teams find works that are priced fairly.
- Third, they file an offering circular with the SEC (Securities and Exchange Commission), which allows investors the opportunity to invest in the piece.
- Fourth, Masterworks holds the piece for 3-10 years. After the holding period, the company will sell the piece and distribute pro rata proceeds to the investors.
One of the key benefits to membership with Masterworks is the ability to access their database.
The company conducts their own research to determine which artists are on trend and whether or not a price is fair. This research is conducted using their own proprietary database. As a member of the platform, you are able to access this database and conduct your own research.
Another great feature is that you are able to pick and choose the art that you want. In fact, you are able to invest in individual pieces of art. With other alternative investment platforms, your money will be invested in a fund where the art investments are chosen on your behalf.
Masterworks Operating History
Since inception, the company has achieved a 15.3% net annualized appreciation per piece of art.
On their website, you can browse a number of recently exited deals. For example, the company recently sold a piece from artist Banksy titled Mona Lisa With AK47, pictured below.
- The company purchased the piece for $1,039,000
- After just 378 days, the company sold the painting for $1,500,000, which was a 32% net IRR
What Are The Fees?
Masterworks does not have any transaction fees.
- Instead, they charge 1.5% annually as a management fee
- Additionally, the company takes 20% of total profits at the time of sale
This fees covers the storage of the art, insurance, administration costs, annual appraisals and regulatory filings.
This helps align the goals of the investors with the goals of the platform. Because they make the majority of their money at the time of sale, they are motivated to get the best price for investors.
Is There A Secondary Market?
Though the investor ought to be aware that Masterworks does not guarantee a buyer should an investor want to sell early.
Before you are a member of Masterworks, you can explore their website and take a look at the secondary market.
How To Get Started With Masterworks?
Due to high demand, they currently have a waitlist to get started. You can request an invite to join currently.
As part of the onboarding process, you will submit an application.
You will have to schedule a phone call as part of this application. This phone call helps you as the investor truly understand the opportunities with Masterworks. While this phone may deter some investors, it truly is in the best interest of the investor.
- Low minimum investment of $500
- Access to iconic artwork without high capital required
- Masterworks handles the legwork (storage of art, insurance, regulatory filings and more)
- Access to proprietary database with art market trends and pricing analysis
- Access to secondary market for early liquidation
- No accreditation required
- Difficult sign up process (waitlist)
- High costs (20% of profit)
If you are interested in getting exposure to the art market, then Masterworks could be the platform for you.
In the past, investments in art required high capital and deep understanding of the market. Now, with Masterworks you can get started with as little as a $500. The platform allows investors the chance to invest in iconic artwork by purchasing shares for as little as $20 each.