Reviewing Masterworks’ strengths and weaknesses is a good way to get a feel for the platform.
By Gabrielle Olya
- What Is Masterworks?
- How It Works
- How Masterworks Earned Its Scores
- Masterworks vs. Competitors
- Final Take
- Accessibility
- 3.0
- Quality of Investments
- 4.5
- Customer Service
- 3.5
- Tools
- 4.5
What Is Masterworks?
Masterworks is the first investment platform dedicated to art investing. It allows everyday investors to own a share of iconic works of art by the likes of Pablo Picasso, Banksy, Andy Warhol and more.
Pros
- Gives you access to contemporary art , which appreciated by 14.1% annually on average from 1995-2021
- Option to hold your investment or sell shares on secondary market
Cons
- Selling shares depends on buyers in secondary market
- Typically a longer term holding period (3 -10 years)
Previously, you had to be extremely wealthy to make these types of investments, but by allowing investors to buy shares of a work of art, it allows you to add this diversity to your portfolio without the funds needed to buy a piece of art outright.
Who Is It Best For?
Investors with an interest in diversifying their portfolios and an interest in art could benefit from the unique opportunity Masterworks provides. However, an interest in art is definitely not a must. Masterworks has analyzed the prices of paintings that have been purchased and resold throughout history and has used this data to identify which artist markets are gaining momentum. All artwork available on the Masterworks platform has been expertly-vetted and curated by its industry-leading research team, so a lot of the legwork that comes along with traditional art investing is done for you.
How To Apply to Masterworks
Masterworks is an invite-only investment platform, but it’s simple to request an invitation via the Masterworks website. Click on the “Request Invitation” link at the top the site, and fill out the online form. You’ll need to provide your first and last name, email address, phone number and password. You can also enter a promo code if you have one.
How It Works
After you’ve been approved, you will create an account and link your bank account. Once that’s set up, it’s easy to get started investing in art. Investors pick the works of art they want to invest in on the Masterworks platform, and identify their desired investment amount.
Once you’ve acquired shares, you have the option to hold your shares until Masterworks sells the piece or sell your shares in Masterworks’ secondary market. Art is typically held for three to 10 years, and after the holding period, investors will receive pro rata proceeds if and when the painting sells, net of fees. Masterworks takes 20% of any profit from sales, and also charges a 1.5% annual management fee.
Masterworks does all of the behind-the-scenes work to find the best art investments possible. The company’s experts determine which artist markets have the most momentum and acquire the best examples available, at the best prices available. After a piece is purchased, Masterworks qualifies it with the SEC and then you can invest in the paintings on their platform.
How Masterworks Earned Its Scores
Accessibility
Masterworks is an invitation-only platform. While everyone is welcome to request an invitation, there are not clear parameters laid out on the website explaining who will receive an invite and what is required to receive one.
According to CNBC, acceptance to the platform requires an interview call with the company’s membership team to talk about your art investing goals and risk tolerance.
Quality of Investments
Masterworks currently has over 100 offerings and has three fully realized investments to date. These include Banky’s “Mona Lisa,” which boasts a realized net IRR of 32.0%, and Albert Oehlen’s “Doppelbild,” which had a realized net IRR of 33.8%. Overall, Masterworks has an annualized track record of 15.8%.
Masterworks’ quality of investments is certainly impressive, but it’s always important to keep in mind that past performance is no guarantee of future results.
Customer Service
Although there may be customer service options exclusively for members, Masterworks does not appear to have on-demand customer service. Those with questions about the platform or its offerings are directed to contact Masterworks by email or schedule an appointment with a platform specialist.
Tools
Masterworks’ extensive price database allows members to research the artwork and artists they are interested in buying. The database includes over 60,000 data points pulled from over 70 years of historical data. Investors can use this tool to learn more about art investing, determine which artwork best fits their risk profile and strategically track the art market.
Another useful tool is Masterworks’ secondary market, which is the first online platform to enable the buying and selling of art investments.
Masterworks vs. Competitors
Masterworks is, as of now, the only platform with its exact capabilities for investing in the art space. One similar platform is Yieldstreet, which gives investors access to fractional ownership of a diversified pool of artwork. The two platforms have some key differences, however.
Good To Know
The secondary market may appeal to investors who prefer more liquidity than would typically be available when investing in art – but it’s important to know how this market works.
Shares are available for transaction 90 days after the primary offering closing, and there are no transaction fees for buying and selling your shares. Although Masterworks provides this platform for buying and selling shares, transactions are privately negotiated between users without its involvement. Masterworks does not guarantee that the secondary market will provide a reliable or effective means of monetizing your investment or valuing your shares.
Masterworks vs. Yieldstreet
Yieldstreet utilizes third-party appraisals and expertise, supplemented with analysis from a proprietary database managed by Athena Art Finance, to select its fine art investments. While Masterworks enables investors to own a share of a specific work of art, with Yieldstreet, investors buy into a fund that contains fractional shares of a pool of artwork. Another key difference is that Yieldstreet requires a minimum investment of $10,000, while Masterworks has no minimum investment.
Final Take
Masterworks removes the barriers that keep most people out of the world of art investing. By letting you invest in multimillion-dollar works via shares, you can get the benefits of art as an investment without the high costs. The option to sell shares on a secondary market also gives your art investment liquidity that would otherwise be unavailable. For investors looking to diversify their portfolios, Masterworks could be an excellent platform for you. However, it’s important to note that while there is opportunity for high ROIs for those able to hold their investments for the three- to ten-year holding period, all investing comes with risk.
Click here to visit Masterworks and learn more.
Is Masterworks a legitimate investment?
Masterworks is a legitimate way to invest in blue-chip artwork. The company currently has over 350,000 registered users and over $400 million worth of securitized paintings.
Who invested in Masterworks?
Investors in Masterworks include the New York-based venture fund Left Lane Capital and other investment firms, including Tru Arrow Partners and Galaxy Interactive, ARTnews reported.
Is Masterworks a broker dealer?
On its website, Masterworks states that it is not registered, licensed or supervised as a broker dealer or investment adviser by the SEC, the Financial Industry Regulatory Authority (FINRA), or any other financial regulatory authority or licensed to provide any financial advice or services
Masterworks is a legitimate way to invest in blue-chip artwork. The company currently has over 350,000 registered users and over $400 million worth of securitized paintings.
Investors in Masterworks include the New York-based venture fund Left Lane Capital and other investment firms, including Tru Arrow Partners and Galaxy Interactive, ARTnews reported.
On its website, Masterworks states that it is not registered, licensed or supervised as a broker dealer or investment adviser by the SEC, the Financial Industry Regulatory Authority (FINRA), or any other financial regulatory authority or licensed to provide any financial advice or services
