Why fine art is now a go-to alternative investment
For years, the standard approach to constructing a balanced portfolio was to allocate a portion of funds to equities and a portion to fixed income; however, lower interest rates made it hard for investors to earn a return on assets that were not highly correlated to the equities market. As a result, portfolio managers and investors with an appetite to beat the market began to look for investments that offered exceptional returns without the impact of market volatility. Fine art fit the criteria.
Over the last 10 years, art prices rose by 91%, according to the Knight Frank Wealth Report. In comparison, the S&P 500 delivered 9.8% annualized returns, over the same period. This makes an investment in fine art ideal. Unfortunately, for many investors there was no way to invest in art unless they wanted to spend millions to buy an entire painting. That is, until the launch of an innovative platform called Masterworks.
What is Masterworks?
Masterworks gives you the ability to invest in fractional shares of blue-chip contemporary art. That means you can invest in the value of paintings completed by well-known artists like Banksy, Picasso and Basquiat.
As an investor using Masterworks, you can select the fine art you want to invest in — with every piece of artwork available through Masterworks thoroughly vetted by their team of industry leaders. Once the Masterworks acquisition team finds a piece they deem worthy based on proprietary data, they purchase it, securitize it, and offer fractional shares to Masterworks members. Based on the Masterworks selection criteria less than 3% of all artwork passes the vetting process — making each investable asset a prime candidate for future appreciation.
The benefit to the investor
With Masterworks, you can diversify your portfolio by investing in a piece of fine art, and you won’t need to get dressed up and spend millions at an art auction.
To earn a profit, you either wait for Masterworks to sell the painting — typical timeframe before Masterworks sells painting is between 3 to 10 years — or you can sell your shares yourself on the secondary market.
For example: Masterworks offered its investors shares in a Banksy painting for $1.03 million, after acquisition. As Banksy’s market took off, Masterworks received an offer of $1.5 million from a private collector. The sale resulted in 32% net annualized gain for investors.
Masterworks takes care of all the heavy lifting from buying the paintings, to storing them, to selling them opportunistically for you — no art experience required.
Get started with Masterworks today and you could make your portfolio as beautiful as a Starry Night.
How it works
Step 1: Accredited investors need to visit Masterworks.com, where they’ll be prompted to enter a few details about their portfolio and investment goals.
Step 2: Investors can schedule a call with one of Masterworks Advisers — registered investment representatives — to determine which current art holdings match their investment goals. The benefit is that you can select one or many art pieces, buying fractional shares based on your interests and goals.
Step 3: As soon as Masterworks sells a piece you invested in, you get a return from the net proceeds. While every artwork performs differently, overall the past three exits — where Masterworks has acquired, held and eventually sold the art work — delivered median returns of 17.6%, 17.8%, and 21.5%.
See important Regulation A disclosures at Masterworks.com/cd
