How Masterworks Lowered The Barriers To Entry For Fine Art Investments

With Masterworks’s platform, ordinary investors like you and me can venture into the elite world of high-end art.

Blue-chip art – for instance, pieces by world-famous artists like Picasso, Warhol, Basquiat, Kasuma, and Banksy – is known to offer high annual returns to investors. Data collected by Masterworks reveals that contemporary and post-war art has appreciated at a CAGR of 12.6% between 1995 and 2022.

In doing so, fine art has outperformed other asset classes like S&P 500 investments and US corporate bonds. Also, it exhibits low correlations to other assets during periods of economic uncertainty. That makes blue-chip art ideal for diversifying your portfolio.

Investing In Fine Art: The Roadblocks For Retail Investors

Nevertheless, investing in million-dollar artwork is a luxury not many can afford. Besides the colossal price point, most people lack the expertise and knowledge to identify high-yield art investments. Also, for first-time investors, the world of auctions and private sales can seem uninviting.

Then there’s the issue of illiquidity. Unlike stocks or bonds, converting fine art investments into another asset class isn’t easy. You’ll have to retain a piece for years before it yields any noteworthy returns. Plus, the subjective nature of art makes it nearly impossible to set a standardized market price. 

You might have spent a huge sum on a painting due to its historical value and your personal affinity for the artist. But not every buyer you come across will share those sentiments. Also, in-demand artists can lose traction, meaning their work can actually depreciate over time.

Even if you ditch the private buyer route and decide to resell via auction houses or galleries, it’s not going to be straightforward. Many galleries are reluctant to sell works of an artist they’ve already sold. Also, you’ll have to shell out money for various fees, including marketing, cataloging, packaging, and shipping.

These challenges have traditionally restricted the high-end art market to ultra-wealthy investors with heaps of dispensable cash. For the rest of us, owning museum-worthy paintings was out of reach.

With Masterworks’s fractional investment platform, those rules have changed.

Breaking Into The Blue-Chip Art Market With Masterworks

Masterworks offer ordinary investors – those who don’t have relationships with art industry insiders or tons of liquid cash – a platform to enjoy the benefits of fine art investments. The company has pioneered the fractional investing model, which makes it possible for members to buy shares of world-famous paintings at a starting price of $20.

Data-Driven Art Acquisitions

Back when the company was first founded, the data collection team at Masterworks spent more than a year compiling a proprietary database of historical auction sales records. Considerable care goes into keeping the database updated. 

The research team combines this data with advanced machine learning algorithms to identify artist markets with high appreciation potential. Besides established names, they focus on spotting undervalued paintings and emerging artists.

The acquisition team uses these data-driven insights to purchase artworks that appear primed to yield the maximum returns for investors. Masterworks do the groundwork to minimize the risk of losses.

Ensuring Affordability With Fractional Investments

After purchasing a painting, the company files an offering circular with the SEC to securitize it. This is what allows the public to buy fractional shares of high-value paintings by George Condo, Simone Leigh, Cecily Brown, and more.

With starting prices as low as $20 per share, you don’t have to worry about locking in thousands (if not millions) of dollars for years. Also, you get the freedom to invest in a wide array of artworks by different artists, which, in turn, maximizes the chances of high returns.

As of this writing, Masterworks has acquired 344 paintings with a cumulative worth of more than $882 million. When you sign up on the platform, you can buy fractional shares of new opportunities as they become available.

Reselling Made Easy

Masterworks usually hold a painting for three to ten years before selling it and paying out profits to shareholders. The platform charges a 1.5% annual management fee and a part of the returns. Nevertheless, it’s more cost-effective than paying fees associated with cataloging, shipping, and the like.

In some cases, when the company’s private sales specialists identify an opportunity, they might sell a painting after a short holding period. This was the case with a Simone Leigh piece, which generated a mammoth 325.5% annualized return after a 36-day hold.

With Masterworks taking care of the entire resale process, you don’t have to worry about negotiating with dealers or private buyers. Nor do you have to keep a watch on current art market trends to harness resell opportunities. That, in turn, helps maintain the liquidity of your investments.

A Secondary Market For Peer-To-Peer Trading

With Masterworks, you get another avenue to liquidate your assets. You can sell your share of any painting on the platform’s secondary market. Think of it as the art-world equivalent of stock trading.

That means you don’t have to lock in your money for the entire period that Masterworks holds a painting. You can sell your shares to other members of the platforms and use the money to invest in other artworks, or even other assets altogether. 

It gives you complete control over your finances and allows you to invest in blue-chip art with confidence.

Opening Fine Art Investments To The Public

Investing in the high-end art market offers several benefits, including promising returns and effective portfolio diversification. Platforms like Masterworks are bringing the benefits of fine art investments to regular investors.

The platform’s fractional ownership model lets you invest in blue-chip art for as little as $20. You can sell your shares in the secondary market or wait for Masterworks to sell the painting and distribute the profits.

In 2022, the company paid out $25 million in returns to its user base. It’s a testament to the growing appeal of fractional art investments, and this looks like a great time for you to take the plunge.

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