Masterworks Review: Pros, Cons, and who should set up an account – Business Insider | Candle Made Easy

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account minimum

$0 (stock price varies by offer)

fees

1.5%/year plus 20% of the profit

investment types

art

account minimum

$0 (stock price varies by offer)

fees

1.5%/year plus 20% of the profit

investment types

art

advantages

  • No minimum to start (minimum share price varies by offer)
  • Masterworks will review each offer/perform the due diligence process
  • Open to accredited and non-accredited investors
  • The platform is easy to navigate

Disadvantages

  • Extremely illiquid
  • Prospective members must attend a phone interview to join the platform
  • The holding period can be between 3 and 10 years
  • No mobile app for Android

overall rating

Is Masterworks right for you?

Masterworks is an online investment platform that offers premium art investments that you can either keep or buy and resell. Unlike traditional investments like stocks and ETFs, Masterworks’ primary asset class is fine arts, which falls under the “alternative investments” category.

Founded in 2017, Masterworks currently has more than 400,000 registered users with more than 100 total artworks and securitized paintings valued at at least $400 million.

Masterworks vs. Yieldstreet

Masterworks should be the first choice for arts-oriented investors who have plenty of time on their hands (the minimum holding period ranges from 3 to 10 years).

Overall, Yieldstreet has lower fees and offers a wider range of alternative investments (ie, multi-asset funds, short-term debt and debt instruments, and more). It also allows you to purchase fractional shares in physical artworks and invest in artwork-backed loans that provide monthly income. Unlike Masterworks, it offers a much more limited selection of artworks (only six listings), and you need a higher minimum to start with $10,000. Both platforms feature blue chip tracks (those from top artists).

Masterpieces vs Republic

Masterworks and Republic are very different platforms when it comes to specific investment decisions, but both offer assets that can be classified as alternative investments. Masterworks is best for long-term investors who appreciate art, while Republic is best for those looking to invest in emerging startups.

While Republic doesn’t specifically offer art investing, you can still use its platform to invest in art-focused startups.

Ways to invest with Masterworks

How it works: Masterworks’ research team uses proprietary data to identify the best artist markets. His team then finds artworks and buys them. After purchase, Masterworks works with the SEC to certify the artworks (this allows anyone to buy shares in the works). In other words, it converts works of art into securities that anyone can buy.

After this phase, the platform offers all members two options: (a) wait until all shares within the artwork/opportunity are sold (Masterworks typically holds the artwork for 3-10 years), or (b) place your shares on the secondary market for sale . Note that you have to wait for both options. Even if you decide to resell your shares, the earliest you can do so is 90 days after the offer has closed and all shares have been sold.

The platform’s secondary offerings are currently limited to US investors with US bank accounts, but those who qualify don’t need to worry about transaction fees for buying and selling stocks. Additionally, secondary market opportunities typically have lower minimum requirements than primary market offerings.

Risks to consider

There are several risks associated with using the Masterworks. The platform describes these in its disclosures:

  • Unproven business model: Many of Masterworks’ features are untested. In other words, success is not guaranteed. The platform says it may have to auction off artworks if its business model ever fails.
  • Issuers are not diversified: Investing in single asset issuers can be risky as you are investing in a single work of art. Additionally, issuers offering investments in a collection of diverse artworks may still offer limited access to that particular art market, according to Masterworks.
  • Illiquidity: Masterworks issuers typically keep paintings for 3-10 years. However, there is still a chance that investors will not be able to liquidate their shares once the hold period has expired, and there is no guarantee that all shares will ever be tradable.
  • Potential Masterworks Conflicts of Interest: Masterworks has no fiduciary duty and its interests (and those of its directors) may not always be aligned with the interests of clients.
  • Opportunity to trade shares: The platform says there is no active public market for those looking to actively trade their art shares. Masterworks also says such a market may never exist and that those who use the resale aftermarket may either pay excessive fees to resell stock or may not be able to resell at all.

More information on the risks of investing through Masterworks can be found here.

Masterworks: Is It Trustworthy?

The Better Business Bureau gives Masterworks a NR (“No Rating”). BBB ratings typically range from A+ to F, but the bureau says it doesn’t have enough information about Masterworks to give a rating for the platform.

The ratings reflect the bureau’s opinion on how well companies interact with customers, but the ratings also consider things like the type of business, time in store, advertising issues, history of customer complaints, and licensing and government actions.

Still, it’s important to do your own due diligence before committing to any investment platform. Bureau reviews do not guarantee performance or reliability.

Masterworks’ records are free of any major lawsuits or scandals, and its profile shows that no complaints have been filed against the company at this time.

Masterpieces — Frequently Asked Questions (FAQ)

What is the minimum to invest in Masterworks?

There is no minimum investment to use Masterworks, but stock price minimums vary by offering.

How do you sell art on Masterworks?

In order to sell shares purchased from Masterworks, you must first join the secondary market. You can do this by clicking “Create Wallet” in the Secondary Market section of its platform (note that Masterworks currently only offers this service to US investors).

Also, you cannot sell your art shares until 90 days have passed since the final closing date. In addition, Masterworks has a minimum sell order of five shares.

Is Masterworks a legitimate investment?

Yes. All of Masterwork’s art offerings have been filed with the SEC, and the platform has been in business since 2017. However, potential investors should note that the company is not registered or licensed with the SEC, the Financial Industry Regulatory Authority (FINRA), or any other regulatory body.

The platform states that certain shareholders act as principals for their art transactions in accordance with SEC Rule 3a4-1.

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