Ever dream of sauntering into an exclusive Sotheby’s auction and casually bidding hundreds of thousands on a Warhol? Or how about sipping champagne at an extravagant gallery opening while scoping out your next blue chip investment? Well, now’s your chance to step into the glamorous world of fine art collecting – no trust fund required.
The Masterworks app is like your backstage pass to this famously exclusive scene of art as a passion investment. For too long, average Janes and Joes have been locked out, while elite aficionados snap up masterpieces. But thanks to Masterworks’ ingenious fractionalized model, anyone can invest in iconic works by Basquiat and Banksy.
WHAT IS MASTERWORKS?
Forget stereotypes of art collectors being stodgy billionaires in ascots. Masterworks is bringing art investing into the 21st century, opening it up to anyone with an internet connection. This maverick startup lets you invest in iconic artworks, even if you can’t afford to drop millions on a Monet.
Masterworks carefully vets museum-caliber pieces while handling all of the back-end nitty gritty stuff so you can sit back and enjoy owning art that would otherwise be out of reach.
That way, you can skip all of the hassles of stuffy auction houses and galleries by browsing and buying shares from anywhere – and you’ll be part of a global community of investors revitalizing art collecting.
By owning shares in these pieces, you obtain an ownership stake in the entire work. If Masterworks sells the piece for profit later, shareholders receive payouts based on their investment. There’s also a secondary market to buy and sell shares anytime.
THE PRESTIGE AND PROFITABILITY OF CONTEMPORARY ART
Contemporary art has been used as a status symbol for the ultra-wealthy. But beyond the glamor lies an extremely lucrative investment asset. After all, most people have seen the news coverage of auctions where works by some of the world’s most sought-after artists sell for over $100 million.
As such, contemporary art consistently delivers annual returns that outperform the stock market.
What makes contemporary art so profitable? A lot of its intrinsic value comes down to cultural significance, and scarcity is also a factor. In 2022 alone, global art auction sales exceeded $15.9 billion.
However, the insider auction process has always seemed off-limits, with so many prestigious works passing between oligarchs and heiresses. Gallery openings are still invite-only affairs. But this century is seeing a shake-up. Startups like Masterworks are finding ways to open the doors and let outsiders access this lucrative market.
DEMYSTIFYING THE PROCESS
Masterworks’ acquisitions team leverages exclusive networks of dealers, collectors, and auction houses to source potential pieces. Using proprietary data analysis, they identify rising contemporary artists with sales momentum. When the team locates a promising work, the real due diligence begins.
Masterworks thoroughly vets each piece to confirm authenticity and quality. The work undergoes scientific testing – canvas thread counts, pigment analysis, radiography – to verify age and materials. Provenance is researched extensively, tracing ownership back at least ten years. Experts examine the work in person, forensically verifying signatures, labels, and stamps. Comprehensive reports benchmark market conditions and valuations.
As a result, only 2% of artworks evaluated pass Masterworks’ strict criteria – highlighting just how serious they are about scooping up only the most promising investments. Once acquired, detailed SEC filings provide transparency on specific pieces.
By showcasing this intensive diligence, Masterworks pulls back the curtain on the typically opaque art world, and investors can have confidence in the assets acquired.
MASTERWORKS’ GREATEST HITS
What exactly has Masterworks been buying and selling in the exclusive art world? This trailblazing company has already made some savvy sales from their coveted collection. To date, Masterworks has sold 16 masterpieces for an average annualized net return of 45%.
That’s right – their curated selections have been appreciating at impressive rates. Some of Masterworks’ biggest exits so far include:
- Joan Mitchell’s sizzling Rhubarb painting: 17.8% annualized return
- George Condo’s mind-bending Staring Into Space: 21.5%
- Sam Gilliam’s gorgeous Lady Day II: 33.1%
- Banksy’s meta Mona Lisa: 32%
- Cecily Brown’s enthralling Lured: 27.3%
Generally, multi-year hold periods allow these contemporary works to mature over time like a fine Bordeaux. Once sold, proceeds get distributed to shareholders after Masterworks takes their cut. While past performance doesn’t guarantee future results, this impressive track record shows the major upside of art investing.
SHOULD YOU GET INVOLVED?
Masterworks lets the everyday investor buy into an exclusive scene, but is it worth the price of admission? Well, there’s no doubt art investing poses risks. Subjective valuations, limited liquidity, and Masterworks’ fees could give pause.
However, they’ve made the traditionally opaque process far more transparent. Rigorous vetting and due diligence inspires confidence in what you actually own, and those impressive returns don’t lie.
Overall, diversifying beyond stocks and bonds makes sense for some investors, especially given art’s steady 7%+ historical gains, and fractional shares open the door without massive buy-ins.
Sure, there are challenges involved with art, but Masterworks innovates past many of them. At minimum, it’s worth weighing the pros and cons yourself.
