With Masterworks Art Investment, you can own blue-chip art as part of your long-term investment portfolio.
Are you looking to diversify your portfolio? Or looking for alternative investments? Then blue-chip artwork may be a new asset class.
What is Masterworks?
Masterworks is a New York-based company that aims to democratize the $1.7 trillion art market. The platform allows customers from all over the globe to invest in masterpieces from artists. You can buy and sell shares of artworks.
Masterworks is an art investment platform for individual investors who want to own fractional shares of “blue-chip” art–artists with a historical appreciation rate in the value of their artwork. It offers the ordinary investor access to alternative assets classes. The platform looks for investment-grade artwork while taking into consideration market conditions and market demand.
View other alternative investment options here.
The Business Model
- Masterworks purchases artwork from some of the most famous artists using its own capital and creates investment opportunities for you to buy pieces of art or shares of these artworks.
- The blue-chip art is purchased from established and popular galleries and auction houses based on the probability of these artworks returning some revenue. This is done by choosing artists in the art market who have a good track record of selling their work. These works should have high appreciation rates.
- Masterworks then files for an offering circular with the Securities and Exchange Commission (SEC), which allows them to issue shares and for anyone to invest in the artworks. The art with Masterworks is stored in temperature-controlled and safe facilities for security purposes and insurance requirements while waiting for their value to appreciate. The investment period is about 3 to 10 years.
- At the same time, Masterworks looks for potential buyers (art collectors or other art investors) who will buy the art piece at a profitable price.
- After selling the artwork, the platform deducts taxes and other expenses from the amount acquired and then distributed the remaining profits to the shareholders based on priorities assigned and initial investment made by each investor during registration.
- If there is a likelihood that the artwork will not provide any significant profit after a period of seven years, Masterworks may decide to sell it through auction. Investors are then informed that the artworks may not yield a return on investment.
How to Use Masterworks
Investors from any part of the world can easily invest in artworks by registering with Masterworks Pro, which requires completing a brief phone interview. Since many investors are trying to register with the platform, you are provided with a waitlist number, and you have to wait for your turn to be served.
As an individual investor, once you complete the interview, you are given an account on the platform, allowing you to begin the investment process. Masterworks provides an easy way to link your bank account and a streamlined experience for choosing your preferred artwork for investment.
- Masterworks’ price database has a direct funding calculator for upfront crowdfunding, helping you understand the amount of money needed to invest in a particular artwork.
- Masterworks provides the Securities and Exchange Commission (SEC) filing details for each artwork which helps you know the investment required for each artwork.
- Additionally, investors from the US can sell their shares of famous artwork to another investor directly through the investing platform.
- Basically, you don’t have to wait for the artwork to be sold; you can sell your ownership in a secondary market. This is made possible by a specially designed application.
You can start investing with as little as $1,000 and spread through multiple artworks.
As an Investor, you need to purchase Class A stock shares that indicate that you own a share of the artwork. Different artworks have different minimum investment amounts, and the type of artwork you choose will determine this amount. You have fractional ownership of the artwork. And the platform does not allow any investor to own more than 10 percent of any given piece of art.
Masterworks charges varying fees for different kinds of investors, such as business investors and institutional investors.
- Annual management fee: a 1.5% annual management fee of your total shares in the artwork. For each year, you invest with Masterworks. The fee is used to pay for storage, appraisals, administrative costs, insurance, and regulatory filing costs.
- Profit-taking: 20% commission of the selling price once the artwork is sold.
- There may be different fee structures for institutional and business investors.
Masterworks Review: Pros & Cons
- A user-friendly and easy-to-use artwork selection and art investing platform.
- Buy and sell shares of artwork ownership in the secondary market.
- Investors can easily access required documents such as SEC filings.
- Based on masterworks reviews, customers enjoy a streamlined process of linking the platform to their bank account.
- No charges for opening your account.
- The platform caters to all clients through an affordable way of investing in artworks.
- Masterworks reviews show that the platform offers excellent customer service.
- No guarantee that the investment will be profitable.
- The registration process is quite tedious as it involves a phone interview.
Who is it best for?
If you’re looking for an alternative asset class and ownership of artwork appeals to you, then consider owning shares of blue-chip art.
Masterworks is suited for investors who are interested in art investing with popular artists. Think Colored Marilyn or art from Willem De Kooning.
However, even with these investment offerings, keep in mind there is no guarantee of an annual return on any piece of artwork. These are considered illiquid investments and may not be best for regular investors.
How to Start Investing with Masterworks
Time needed: 5 minutes plus phone interview wait time.
Step-by-step to open a Masterworks account
- Getting started
Start the process on Masterworks.io.
- Request an invitation
Enter your name, email, and phone number. Submit the request.
- Wait for your phone interview.
It may take a few days to finalize your application.