Masterworks is an alternative investing platform for non-accredited investors to diversify their portfolios with contemporary art from famous artists like Banksy, George Condo, and Andy Warhol.
Business Insider compared Masterworks to the best commodity trading platforms and investment platforms. We found it stands out for its access to vetted art investments, which are usually inaccessible to retail investors. However, fees are high and lack transparency.
Pros and Cons
Masterworks Pros
- Artwork vetted through Masterworks' due diligence process
- Early liquidity through the secondary market
- User-friendly art investment research
Masterworks Cons
- Fine art is a high-risk investment with low liquidity
- High 20% fee on all profits earned
- Website lacks fee transparency
- High $15,000 minimum investment
- Limited to up to 10% in shares per artwork
Open an Account
$15,000
1.5%/year plus 20% of profit
- Easy-to-follow investing process
- Masterworks vets each offering/handles due diligence process
- Open to both accredited and non-accredited investors
- Platform is easy to navigate
- Extremely illiquid
- Prospective members have to participate in phone interview to join platform
- Holding periods can range from 3-10 years
- Access hundreds of fine and contemporary artworks that have historically outpaced the S&P 500.
Compare Masterworks
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Masterworks Overview
Masterworks is a global online art investment market offering fractional shares of pre-vetted blue-chip artworks, allowing retail investors to profit from what is usually an area of the market only available to the wealthy. You don't have to be accredited to use Masterworks.
Blue-chip art is art created by upcoming and well-established artists commonly featured in museums and art galleries. Compared to other art investments, blue-chip art is low-risk. Still, art investments pose more risk than traditional assets like stocks, bonds, and ETFs. Masterworks does not offer NFTs.
You make money on Masterworks by buying shares of artworks that appreciate in value over time. Masterworks sells artworks at a higher price than it buys, dividing the profit among its investors. Since it's a newer platform, Masterworks has only sold 23 artworks so far. The platform says it is buying new artwork every week.
Most artworks on Masterworks have an annualized return of around 20%, but some have returned upwards of 75%, while others return less than 5%.
Fine art is generally more risky than other types of investments and overall has low liquidity. If you play your cards right, you may be able to sell your assets for a high price. But you're still at risk of losing most, if not all, of your money. Only folks who are knowledgeable about fine art should invest in it.
Overall, Masterworks is a user-friendly platform that streamlines the art buying and selling process, but fees can be hard to find, and the initial set-up process is a bit convoluted. The investment minimum is $15,000, but some users have reported being able to invest for much less after talking with a representative during the onboarding call.
Masterworks is best for experienced traders who don't mind the risk and limited liquidity of investing in contemporary fine art. It isn't the best option for risk-averse investors who want investments with greater liquidity. Also, you'll need to hold assets for at least three years, and exit fees can be quite high.
You can contact and schedule a call with a Masterworks advisor through email or phone. Customer service hours are 9 a.m. to 6 p.m. ET, Monday through Friday.
Masterworks has a rating of 4.8/5 on the Apple Store and 4.7/5 on Google Play.
Ways to Invest with Masterworks
To sign up with Masterworks, you must request an invitation and then fill out a membership application including your personal information and the size of your liquid investment portfolio. Next, you participate in a one-on-one phone interview with a Masterworks advisor to discuss your goals and financial objectives. They will walk you through your first investment. Afterward, you can invest online on your own.
Although Masterworks has advisor access, advisors don't actively monitor or manage your investments after the initial onboarding call.
Masterworks Fractional Art Shares
Art on Masterworks is pre-vetted. Less than 3% of the artworks offered from 24,000 analyzed artist markets are accepted on its platform, as artworks must pass through Masterworks' rigorous diligence process.
The Masterworks research team uses proprietary data to pinpoint the best artist markets and purchase promising works. Artworks are purchased through private sales from private collectors, auction houses, and established galleries.
Featured artists include Andy Warhol, Banksy, Carmen Herrera, George Condo, Elizabeth Peyton, Pablo Picasso, and Liu Ye.
Once purchased, Masterworks files the art pieces with the SEC to securitize them. In other words, it converts artwork into securities anyone can buy. Individual investors can't hold more than 10% of shares for a specific artwork in their portfolio.
After you buy shares of a specific artwork, you must wait until Masterworks sells the painting (typically three to 10 years) before receiving earnings. Once your shares have been liquefied, the funds will be deposited into your account.
A Masterworks account gives you access to research on contemporary and fine art market investment research and up-to-date market data. Datasets show recent sales, annual returns, and gross artwork appreciation.
Masterworks Wallet Account
You also have the option to sell shares directly to other US users on the platform's secondary market. However, you must have a qualifying brokerage account to access fee-free trading on Masterworks' secondary trading market. You must also wait at least 90 days after purchasing shares before being eligible to start selling.
Masterworks doesn't offer a brokerage account directly. Instead, users can open a wallet account provided by Templum Markets to deposit funds and participate in trading on the secondary market. Templum is a multi-asset investment platform that offers automated investing strategies, secondary trading, and data.
A Templum wallet account can also fund purchases on Masterworks' primary market.
You may get more liquidity from your assets if you sell early on the secondary market rather than waiting for Masterworks to sell on the primary. However, the secondary trading market is only available for US users.
Risks to Consider
Masterworks alternative investments come with several unique risks. The platform outlines these in its disclosures:
- Unproven business model: Many of Masterworks' features are untested. In other words, success isn't guaranteed. The platform says it may have to auction off artwork if its business model fails.
- Issuers are un-diversified: Investments with single-asset issuers can be risky since you're investing in a single piece of art. In addition, issuers that offer investments in a collection of different art pieces may still only offer limited access to that particular art market, according to Masterworks.
- Illiquidity: Masterworks issuers typically hold paintings for three to 10 years. However, there's still a possibility that investors won't be able to liquidate their shares after the holding period, and there isn't a guarantee that all shares will ever be tradable.
- Ability to trade shares: The platform says there isn't an active public market for those who want to exchange their art shares actively. Masterworks also says such a market may never exist and that those using the resale secondary market might either pay excessive fees to resell shares or may not be able to resell at all.
You can find more information on the risks of investing through Masterworks on its website.
Masterworks Stone Ridge Art Risk Premium Fund (AARTX)
Financial advisors can invest in Masterworks' Stone Ridge Art Risk Premium Fund (AARTX), which is a curated portfolio of more than 150 artworks from over 50 artists. The underlying value of all the art in the fund is over $600 million.
There is no secondary market for these shares. In the disclosure for the fund, it states that investors should be prepared to hold shares for an indefinite period of time and that there is no assurance that shares will be profitable.
Masterworks Fees
Masterworks charges:
- 20% fee on all profits earned when you sell
- 1.5% annual management fee in the form of equity, which covers security, insurance, and similar costs
- One-time 10% expense allocation fee
To start investing, you'll need at least $15,000. Shares are in $20 increments. Masterworks' steep 20% commission can be a significant cut, since fine art liquidity can be low.
Masterworks Trustworthiness and Security
Masterworks safeguards users' personal information by regularly employing companywide training. Other security features include industry-standard encryption technology and automated monitoring tools.
All artwork offered by Masterworks is filed with the SEC. The filings for each artwork can be accessed on Masterworks' website. However, the platform itself isn't registered or licensed with the SEC.
The artworks Masterworks owns are stored at the Delaware Freeport and UOVO Facrilies, which are fire and waterproof and climate-controlled.
The Better Business Bureau gives Masterworks an A+ rating. BBB ratings range from A+ to F, and Masterworks has received the highest rating.
Ratings reflect the bureau's opinion of how well companies interact with customers, but they also take into account factors like the type of business, advertising issues, licensing, and government actions.
Masterworks' record is clear of any major lawsuits or scandals.
Masterworks Alternatives
Here's how Masterworks compares to similar alternative investment platforms.
Masterworks vs. Yieldstreet
Masterworks and Yieldstreet both offer investable art pieces from top-performing artists. However, the platforms differ regarding investment options, account options, and fees.
In general, Masterworks should be the go-to for art-focused investors interested in fractional ownership of fine art for long-term art appreciation. Compared to Yieldstreet, Masterworks offers a more comprehensive selection of vetted artworks. Moreover, users can increase liquidity by trading through the secondary market.
If you want to invest beyond fine art, Yieldstreet is the better platform offering simple portfolio diversification. It offers a range of alternative investment options, including multi-asset class funds, short-term notes, and debt securities. Yieldstreet also offers artwork-backed loans that provide monthly income streams.
Masterworks vs. Republic
Republic is another alternative investment platform for accredited and non-accredited investors to diversify their portfolio with startups, crypto, real estate, music, and art. Masterworks and Republic are drastically different platforms for specific investment choices, but both provide assets classified as alternative investments.
Masterworks is best for long-term-focused investors who appreciate art, while Republic best suits those who want to invest in up-and-coming startups. Though Republic doesn't specifically provide art investments, you can still use its platform to invest in startups that specialize in art.
Masterworks: FAQs
Masterworks is not a scam. All of Masterworks' art offerings have been filed with the SEC. However, prospective investors should note that the company itself isn't registered or licensed by the SEC, only the offered securities.
Masterworks determines the value of artworks using the Fair Market Value appraisal, which is a method frequently used by the IRS. A team of USPAP-certified appraisers and art market professionals evaluates all the components of the artwork, including its condition, the artist behind it, and when it was created.
To sell your shares on the secondary market, you must choose "create wallet" in the Secondary Market section of Masterworks' platform. (Note that Masterworks only offers this service to US investors.) You can only sell your art shares after 90 days from the offering's final closing date.
Why You Should Trust Us: How We Reviewed Masterworks
Masterworks' alternative investment platform was reviewed using Business Insider's rating methodology for investing platforms to examine investment options, ethics, fees, and overall customer experience when reviewing investing platforms. Platforms are given a rating from 1 to 5.
Investment platforms usually offer multiple assets, trading tools, and other educational resources. Some platforms are better for more advanced investors or active investors, while others may be better for beginners and passive investors. Masterworks was evaluated with a focus on how it performs in each category.
Masterworks Review: Business Insider's Overall Rating
| Feature | Insider rating (out of 5) |
| Fees | 3.00 |
| Investment selection | 3.50 |
| Access | 4.50 |
| Ethics | 4.50 |
| Customer service | 4.00 |
| Overall score | 3.88 |
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