Masterworks is an alternative investment platform allowing you to purchase fine art shares. Masterworks has low investment requirements, so you don’t need to be an art expert or have deep pockets to get started. You can invest in art shares starting at a minimum investment of $20 for your initial investment.
This opens the fine art market to regular investors who want to diversify their portfolios. Masterworks focuses on investment products like contemporary pieces of art from famous artists like Banksy and Basquiat.
The platform conducts extensive research and due diligence to source and select pieces with strong investment potential. But how does it rank amongst some of the best alternative investment platforms? Here is a detailed Masterworks review.
How Does Masterworks Work?
To invest in contemporary art without actually purchasing physical artwork, Masterworks provides an intriguing platform. Masterworks acquires promising contemporary art pieces and then sells shares to potential investors like you.
Guided by a database of contemporary art prices and market trends, Masterworks chooses artworks showing strong potential. Only 3% of the pieces make the cut. After securing artwork, Masterworks legally registers it with the SEC. This allows the art to be divided into fractional shares.
When the time is right, Masterworks leverages its private sales team to sell the art on public markets. Profits, after fees, are distributed among shareholders.
Masterworks Investment Options
Once you’ve invested in a Masterworks offering, you essentially become a fractional owner or have partial ownership of that piece of blue-chip art. The investment options and opportunities Masterworks provides its members are quite attractive.
Primary Offerings
After the SEC approves an individual artwork, Masterworks gives members 90 days to purchase shares in the initial public offering (IPO). With shares starting at just $20, you can invest as much or as little as you like based on your budget and risk tolerance. Masterworks will then hold the art for 3 to 10 years when they work to find a buyer from art collectors or the contemporary art market.
Secondary Market
If you want to cash out early or increase your position, you can buy and sell shares on Masterworks’ secondary market. Here, members can set their own asking prices to sell shares to other members or purchase additional shares from others. Masterworks charges a nominal fee for all secondary market transactions. This is more of a long-term investment.
Masterworks Pricing & Fees
Masterworks prides itself on transparency when it comes to fees. Unlike some other platforms, Masterworks does not charge any upfront fees to invest or fees when you sell your shares to other retail investors on the secondary market. However, Masterworks does charge two ongoing fees:
- An annual 1.5% management fee is based on your total account value. This fee is deducted from your equity annually, diluting your shares. There is no option to pay this fee in cash. The management fee covers costs like storing, insuring, and maintaining the artwork and SEC regulatory fees.
- A 20% profit when the pieces of artwork are sold. Masterworks take a 20% cut of the total profit when a piece of art is sold to the open market. This incentivizes Masterworks to buy and sell art that will appreciate substantially in value.
Masterworks Features
When it comes to investing in alternative assets like fine art, Masterworks is a standout platform. Here are some of the features that make Masterworks the best:
- Excellent Art Investment Research: Masterworks provides users with comprehensive research on the contemporary artist market, including a database tracking the prices of individual artworks.
- High-Potential Industry: The contemporary artwork market has experienced significant growth.
- Crème de la Crème: Masterworks acquires iconic pieces from renowned artists like Jean-Michel Basquiat, Joan Mitchell, Pablo Picasso, and Banksy.
- Great Customer Support: Exceptional customer service is hard to find nowadays, but Masterworks provides support via phone and email.
- User-Friendly Platform: Masterworks has designed an intuitive online platform accommodating new and seasoned art investors. The website is simple to navigate, with details on current offerings and an overview of the team’s art expertise.
- Mobile App: Masterworks has mobile apps for both iOS and Android users. The app offers a seamless experience, making it easy for everyday investors to access accounts, monitor investments, and stay updated on the latest art offerings on the go.
- Educational Resources: They offer a wealth of educational resources to help individual investors and institutional investors better understand the fine art market and make informed investment decisions. Their blog, videos, podcasts, alternative asset classes, and webinars feature insights from art experts and the Masterworks team.
Is Masterworks the Best Alternative Investment Platform?
Masterworks provides an innovative way for you to diversify your investment portfolio as an average investor with alternative assets like world-class art and famous artwork. You can invest in shares of artwork rather than shelling out millions to acquire a famous piece of art. The team at Masterworks handles all the buying, selling, insurance, security, and storage for you.
Of course, art is an illiquid investment, so your money is tied up for some time. And there is always a chance that a piece won’t appreciate as much as projected. But with Masterworks’ expertise, the risk is lower than if you were acquiring art independently. So, if you want to dip your toe into the art investment world, click here to start with Masterworks and start your passive income journey.