Masterworks Review(2023): Art investment, Scam or Secret to Wealth?

Written above: Masterworks is best for experienced, active traders who want to diversify their portfolios through fine art. The platform allows you to buy shares from the best performing art markets and potentially resell these shares on the secondary market. This platform is not the best choice for risk-averse investors who want highly liquid investments. Also, keep in mind that you need to hold on to the assets for at least three to ten years, depending on the art you invest in.

About Masterworks
Masterworks is an online investment platform that offers investments in blue-chip art that you can hold or buy and resell. Unlike traditional investments such as stocks and ETFs, Masterworks’ main asset class is art, which belongs to the “alternative investment” category. The investment period ranges from three to ten years.

Masterworks is the best choice for experienced traders who don’t mind the risks and limited liquidity involved in investing in contemporary art. Top artists on Masterworks tend to outperform the S&P 500, and art prices are generally not affected by periods of economic stress. You can find paintings by famous artists like Van Gogh, as well as paintings by current artists like Banksy and George Condo.

The platform currently has over 755,000 registered users with over 200 works of art and over $800 million worth of securitized paintings. Masterworks only accepts art for less than 5% and only selects assets with annual returns between 9% and 39%.

Users can access top art investment research on the contemporary and fine art markets, as well as the latest market data. The dataset shows recent sales, annual returns, and total appreciation for a specific artwork.

To register, you must first complete a membership application form and then attend a telephone interview. The interview process focuses on your goals and financial goals. Masterworks says on its website that phone interviews are a good time to ask questions.

Masterworks Investment Example
So, how exactly does Masterworks work?

 

Masterworks has a robust process for buying and storing art, as well as attracting investors and ultimately selling the art for a profit.

Here’s a complete breakdown of its investment process:
Collection and storage
Masterworks has created a comprehensive contemporary art pricing database that shows the price appreciation of art bought and sold at auction over the past few decades, as well as information about artist market trends.
It uses this data to find the art they believe has the most momentum, and the acquisitions team will negotiate and purchase the works they believe are best suited for the platform. Less than 3% of artworks pass the due diligence process.
After purchase, the artwork will be transferred to a secure storage facility.
After acquiring the artwork, Masterworks files an offering under Regulation A with the U.S. Securities and Exchange Commission (SEC) to securitize the artwork into individual shares that can be issued to investors on the platform.
This allows both accredited and non-accredited investors to invest in shares of art.
Invest with Masterworks
After registering a Masterworks account and completing the membership process, you can invest in stocks directly on the Masterworks platform.
Masterworks expects to hold each piece of art for three to 10 years before selling it, making it less liquid than stocks and bonds but comparable to many other alternatives such as private equity and venture capital.
When Masterworks deems the time is right, its private sales team will sell the work and distribute all profits, net of fees, to shareholders on a pro-rata basis.
Masterworks does offer a marketplace where you can sell your shares to other investors before the artwork is ultimately sold.
That said, it does not promise liquidity within the market, which means you may need to hold on to the stock until the art sells.

Masterpiece Track Record
To date, Masterworks has sold 13 pieces of art, with returns on art sold ranging from 10.4%, 21.5%, and even 35%.

Who is Masterworks best for?
Masterworks is ideal for investors looking to diversify their portfolio into alternative assets, as well as art investors who don’t want to deal with the upfront costs, required maintenance, and hassle of buying and selling art on their own.
Masterworks does require an upfront investment of $10,000, and investments are not guaranteed to be liquid, so investing is best suited for long-term investors who won’t need access to their funds for a significant period of time.
As an alternative investment platform, investing through Masterworks carries a higher level of risk than traditional investing. However, many of their artists exhibit strong market risk-adjusted appreciation (often measured by the Sharpe ratio).
Nonetheless, investors need to have a high risk tolerance for the funds invested on the platform, as there are no guaranteed results and it is still a relatively new type of investment.
Finally, Masterworks is an art investment platform where members choose which works to invest in.
If you don’t have at least some understanding of the industry and market (or a desire to learn more and do research), then this investment may not be the best fit.
However, they do have a team of affiliated financial advisors who can help guide you to appropriate investments based on your risk tolerance.

Are masterpieces legal?
Masterworks securitizes all of its products with the SEC. Any investment advice provided through the Platform is provided by investment advisor representatives of Arete Wealth Advisors, an SEC registered investment advisor. .
Masterworks has over 650,000 registered users and has over 230 high-end works available for investment. Since the platform was founded in 2017, 13 artworks have been sold and counting.
Yes, it’s legal.

Are Masterpieces a Scam?
No, Masterworks is not a scam. This is one of the only ways to invest in high-end art without a lot of upfront capital.
Investment alternatives are (unfortunately) filled with many scammers, especially when it comes to art, collectibles, and digital assets like cryptocurrencies and NFTs. But Masterworks aims to be highly transparent to its platform members and investors and files all of its products with the SEC.
Each work is contained within its own special purpose limited liability company (LLC) and “securitized” to allow investors to invest in stock in that LLC, whose only asset is the artwork. This is similar to how other alternative investment platforms work.

Masterworks key data
Masterworks Returns: Recent returns include 10.4%, 13.9% and 35% annualized net gains
Masterpiece fee: 11% initial “adjustment” in the form of equity, 1.5% annual management fee, 20% commission on profits from art sales
Number of users: 676,000+

Action is worse than excitement, click to register and start your art investment journey!

Masterworks Insights