If you’re looking for a way to diversify your investment portfolio with an alternative asset class, the Masterworks app might be the solution you’ve been searching for. The fractional art investment platform allows people from all walks of life to purchase fractional shares in blue chip art assets, such as paintings from some of the world’s best-known artists.
In this Masterworks review, we’ll take a closer look at the features of the platform and how it benefits investors looking to protect, diversify, and optimize their portfolios.
Masterworks is a leading firm and platform specially designed to help investors purchase and trade shares in multimillion-dollar, blue-chip artworks. Since inception, the company has acquired more than $882 million in blue-chip contemporary paintings, allowing customers to own a share of pieces like Banksy’s Mona Lisa.
Scott Lynn founded the company after seeing the rising value in his own art collection. He wanted to make art a more accessible asset class, giving everyone the opportunity to purchase “pieces” of a multi-million dollar creation, instead of purchasing them outright. After all, fine art is a compelling asset class to investors. Not only has it outperformed the S&P 500 by significant margins in recent years, but it also benefits from low correlation with other asset classes during periods of financial stress.
With Masterworks, individuals can purchase shares of art pieces carefully selected by Masterworks, based on their potential for growth and profitability. The artwork is securitized, and held for between 3-10 years, during which users have the option to sell their shares on the Masterworks trading market. Eventually, when Masterworks resells the painting, the platform’s investors share the profits on a prorated basis.
Masterworks Key Features
As a fractional alternative asset investment platform, Masterworks offers a few noteworthy features:
- Proprietary data for art selection: Masterworks uses proprietary data to determine which artist markets have the most momentum. Only around 3% of all evaluated artworks pass the company’s diligence process, putting you in position to invest with minimal risk.
- Art sourcing: With Masterworks, investors don’t have to source investment opportunities themselves. Instead, the company’s acquisitions team purchases the art and securitizes it with regulators, so individuals can buy shares, similar to buying stocks in a business.
- Budget-friendly investing: Rather than having to purchase entire pieces outright, investors can choose how many shares they want to purchase in each specific piece of art. You can scale your portfolio however you choose and watch it appreciate in value.
- Price database: Once you’ve purchased a share in a piece, you can use Masterworks’ price database to track the evolution of the asset over time. There are even insights into artist metrics, like the value of recent auction sales for each creator.
- Investment management: Whereas purchasing fine art outright would require significant work in securing and maintaining the asset, with Masterworks, the management process is handled for you. The team holds the artwork for up to 10 years, on your behalf.
- Trading market: If you need to liquidate your investments on the platform, you’ll have the option to sell your shares on the Masterworks trading market. This means you can access profits from your shares, even before Masterworks sells the painting.
- Art sales: The private team at Masterworks eventually sells paintings, by collaborating with some of the top collectors in the art market. When a painting is sold, you recoup the values of your shares, which you can access after payouts, or invest into other assets.
- Wallet accounts: Masterworks’ trading platform allows users to deposit funds and trade shares using brokerage accounts provided by Templum. You can use this account to trade directly with participants throughout the US, and buy shares in newly available paintings.
These features collectively present Masterworks as an innovative solution for art investment. You can unlock all of the benefits that some of the world’s richest people access by purchasing and selling blue-chip art, without the hefty costs.
Masterworks Pricing and Business Model
The pricing for each share of a piece of art on the Masterworks platform varies depending on its estimated market value at any given time. However, the good news is that the platform is free to use, with no monthly subscription costs, or trading fees.
With an invitation to Masterworks’ trading market, you can buy and sell shares with others across the US, and view transparent pricing data for paintings. There are even order books you can review to analyze pricing trends.
The Masterworks business model is also relatively straightforward. The company sources art by painters who exhibit attractive investment characteristics. These artists are identified by a research team using proprietary data analytics tools. The works from those artists are then sourced by an experienced acquisition team, and held by the company for a series of years.
Masterworks earns a 1.5% annual management fee, distributed in equity. This means you don’t pay your fee with cash out of your pocket, but your ownership stake does dilute slightly over time. Additionally, Masterworks earns a 20% profit share after an artwork is sold. Each investment entity also pays a one-time expense allocation or artwork sourcing, securitization, and platform fees.
Who Is Masterworks For?
Whereas fine art investing was once accessible only to the ultra-wealthy, the Masterworks fractional model lowers the bar for entry, so that new classes of investors can now participate.
- Beginner investors: If you’re a beginner, Masterworks offers a simple and intuitive way to start purchasing art shares. You get access to proprietary data, a straightforward trading platform and brokerage account.
- Those seeking diversity: If you want to diversify your investment portfolio, Masterworks gives you the opportunity to invest in an alternative asset class that shows low correlation with other markets and indexes, providing a great way to reduce risk and hedge their investments.
- Long term investors: Since Masterworks uses the buy and hold model for art assets, it’s not intended for people who want to immediately make money by selling stocks and shares on a daily basis. Although there is a secondary market on the platform, you’ll need to be patient to make a significant profit.
- Art enthusiasts: Masterworks gives all art lovers a chance to claim ownership of some of the most impressive masterpieces ever created. If you’ve ever wanted to say you own a Picasso or a Warhol, Masterworks could be ideal for you.
- Low risk investors: While no investment is entirely risk-free, contemporary art has benefited from a strong historical appreciation trend, making it a low-risk investment opportunity for beginners. Additionally, Masterworks’ approach to data-driven purchasing helps to further reduce your risk.
Masterworks vs Other Art Investment Solutions
While Masterworks was one of the first companies to introduce the world to the concept of art fractionalization and tokenization, various other platforms have emerged since. There’s the Artex stock exchange in Liechtenstein, for instance, and the Mintus platform in the UK.
However, many of these alternative platforms do impose limitations on who can invest.
Additionally, the company’s proprietary approach to research and data analytics ensures it only invests in the pieces with the most profit potential, reducing investment risk.
Final Verdict on the Masterworks Platform
In summation, Masterworks isn’t your standard digital investment solution. It’s a powerful platform for people looking to diversify their investment portfolios and leverage the benefits of blue-chip art.
The company has proven itself to be a reliable choice for its users, and it now has more than 810 million members worldwide. Plus, since risks and profits are both pooled, new starters and veterans alike can both access the benefits Masterworks has to offer. If you’re looking for an easy way to get started in the art investment landscape, Masterworks could be the platform you’ve been searching for.