Masterworks Review 2024 (2024)

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About Masterworks

Masterworks is an online investment platform offering blue-chip art investments that you can either hold onto or purchase and resell. Unlike traditional investments such as stocks and ETFs, Masterworks' key asset class is fine art, which falls under the category of "alternative investments." Investments are designed to be held between three and 10 years.

Masterworks is the best for experienced traders who don't mind the risk and limited liquidity involved with investing in contemporary fine art. The top artists featured on Masterworks often outpace the S&P 500, and the price of art isn't often affected by periods of financial stress. You can find paintings from famous artists like Van Gogh, as well as current high-performing artists like Banksy and George Condo.

The platform currently has more than 755,000 registered users, with 200+ total art pieces and more than $800 million in securitized paintings. Masterworks accepts less than 5% of the artwork offered to it and only chooses assets that have an annual return between 9% and 39%.

Users can access top-notch art investment research on the contemporary and fine art market, as well as up-to-date market data. Datasets show recent sales, annual returns, and gross appreciation of a given artwork.

To sign up, you must first fill out a membership application, and then participate in a phone interview. The interview process is primarily focused on your goals and financial objectives. Masterworks states on its site that the phone interview is a great time to ask questions.

Masterworks Overall Rating

Masterworks Pros and Cons

If you believe it's is a good time to sell, you can access the secondary trading market to sell or assets for no trading fees. You may be able to get more liquidity out of your assets if you sell early. But the secondary trading market is only available for US users.

However, fine art is generally more risky 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.

Is Masterworks Trustworthy?

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 the ratings also take into account things like type of business, advertising issues, and licensing and government actions.

But it's nonetheless important to do your own due diligence before settling on an investment platform. The bureau's ratings don't guarantee performance or reliability. So read customer reviews or talk with friends or family who have used Masterworks for better insight.

Masterworks' record is clear of any major lawsuits or scandals.

Ways to Invest With Masterworks

Here's how it works: The Masterworks research team uses proprietary data to pinpoint the best artist markets. It finds art pieces and purchases them. Once purchased, Masterworks files them with the SEC to get the art pieces securitized (this allows anyone to buy shares of the works). In other words, it converts artwork into securities anyone can purchase. But keep in mind that you can't hold more than 10% worth of shares for a specific artwork.

Following this stage, the platform gives all members two options:

1. Wait until Masterworks sells the painting. Masterworks will typically hold the artwork for three to 10 years. Once it sells the art, your shares will be liquefied and the funds distributed to your account.
2. Or you can sell your shares on the secondary market. But you'll still have to wait at least 90 days after the offering has closed and all shares are sold.

The platform's secondary offerings are currently limited to US investors with US bank accounts.

Masterworks doesn't offer a brokerage account directly. Instead, Masterworks users can open a wallet account provided by Templum to deposit funds and participate in trading on the primary market. Templum is a multi-asset investment platform that offers automated investing strategies and secondary trading and data.

Investment Options

Mastworks only offers fractional shares of fine art. If you're wanting to invest in other asset classes like stocks, ETFs, mutual funds, crypto, or other alternative investments, you should consider a different investment platform.

Masterworks Fees

Fees on Masterworks can vary based on which artwork you're investing in, but you'll need at least $15,000 to start investing. This can be used to buy one or multiple assets. There's also a 1.5% annual management fee, which covers security, insurance, and similar costs.

Shares are used in $20 increments. Plus, Masterworks will charge you a steep 20% commission on profits when you sell. And since fine art liquidity can be low, this can be a pretty significant cut.

Masterworks Frequently Asked Questions (FAQs)

Methodology: How We Reviewed Masterworks

Masterwork's alternative investment platform was reviewed using Personal Finance 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 0 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.

How Masterworks Compares

Masterworks vs. Yieldstreet

Masterworks and Yieldstreet both offer blue-chip art pieces from top-performing artists. But the platforms differ when it comes to investment options, account options, and fees.

In general, Masterworks should be the go-to for art-focused investors who have a lot of time to hold onto artwork, as its minimum holding period ranges from three to 10 years.

Yieldstreet has lower fees overall, ranging from 0% to 2.5%, and it offers a wider range of alternative investments like multi-asset class funds, short-term notes and debt securities, and more. You can invest in artwork-backed loans that offer monthly income. Yieldstreet also only requires a $10,000 minimum investment to open an art portfolio. However, it has a much more limited selection of artwork (only six offerings).

Masterworks vs. Republic

Masterworks and Republic are very different platforms when it comes to specific investment choices, but both provide assets that classify as alternative investments. Masterworks is best for long-term-focused investors who have an appreciation for 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.

Risks to Consider

There are several risks associated with using the Masterworks. 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 ever 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.
• Potential Masterworks conflicts of interest: Masterworks doesn't have a fiduciary duty, and its interests (plus that of its Board of Managers) may not always align with client interests.
• Ability to trade shares: The platform says there isn't an active public market for those who want to actively exchange their art shares. 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 here.