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A volatile year for the market has many investors thinking about diversifying their portfolios. Some alternative investments that come to mind include real estate, gold, bonds… and now fine art?
Thanks to the uniting force that is the internet, large groups of investors are able to come together to buy and sell shares of fine art. Regular investors are able to invest in a piece of well-known artworks from famous contemporary artists like Banksy and Jean-Michel Basquiat.
This convergence of art and finance opens up the ownership of art as an asset class. The current online leader in the fine arts investing space, Masterworks, recently garnered a valuation of over $1 billion, and offers a new approach to investing in fine art.
This article will center around the leading provider, Masterworks. There are other places where you can buy alternative investments online, but none offer the same caliber of comprehensive research, experience and overall focus on fine art.
We've dug into the why’s behind fine art investing as well as how it works with Masterworks.
Why fine art?
Contemporary art’s historical performance as an asset class is one of the big draws for investors. It boasts an average 13.8% price appreciation over the past 25 years, outpacing the S&P 500, while also demonstrating appealing appreciation rates during times of inflation (according to the MW All Art Index). This may not be representative of the experience of everyone investing in contemporary art, but is a noteworthy trend.
Another appeal of fine art investing is the ability to follow (and learn) about contemporary artists. Following artists and discovering new artwork to invest in appeals to both finance and art enthusiasts.
Like most investments with higher return, there is generally higher risk. This product is ideal for investors who are passionate about art, and are comfortable with longer term investments.
How it works
In a nutshell, Masterworks members invest in a small piece of the larger artwork. The Masterworks’ acquisition team will find and buy a piece of artwork that it believes has a likelihood of appreciating in value over time. Fractional shares of the art are then offered to investors via their platform.
Once art is acquired, it’s generally not sold for 3-10 years, which is why this type of investment is generally a longer term play. If an investor needs to get out before then, they can look for buyers of shares on Masterworks’ secondary market.
The secondary market allows shareholders to sell shares within the Masterworks network. Because this secondary network consists only of a network of Masterworks investors, there is no guarantee one would be able to liquidate their investment.
If you are (or want to be) an art enthusiast and are looking to diversify your investment portfolio, Masterworks offers a compelling option. Excellent art investment research and top notch customer service allow beginning investors to have the tools they need to get started.
To get started, fill out the quick form here with your name, email, and phone number to apply for a Masterworks membership.