Investors must wait until Masterworks sells the painting in order to see, hopefully, a gain. Lynn warns that users should think of Masterworks' art pieces as long-term investments, which is why the company doesn't even accept those over age 70 to use the platform.
You have to be comfortable leaving your money locked up for several years - or even losing it. Getting in on a piece of iconic art at a price that doesn't break the bank can be every bit enticing, but know that investing in art is a multi-year commitment. Those interested can visit the Masterworks website and apply for membership, which requires an interview call with the company's membership team to talk about your art investing goals and risk tolerance. Once an investor's account is enabled, they can pick and choose individual paintings to invest in, however, that may take some time as the company is currently operating on a waitlist. But like most alternative investments that carry high fees and higher risk, fine art can provide potentially higher returns than investing in traditional investment vehicles. While the management fee and 20%-of-profit fee are in line with a hedge fund's industry standard, these fees are relatively high when compared to investing in something like a market-tracking index fund. Other applicable fees may apply, which are detailed in the offering documentation that investors receive. Masterworks charges a 1.5% annual management fee, plus the company takes 20% of any profits from an artwork's sale. Individual investors are limited to owning no more than 10% of an individual work of art. Masterworks investors are required to meet a minimum investment depending on the piece of art they are investing in. Plus, Masterworks lets you invest your IRA earnings into their fine art through its partnership with Alto IRA, an alternative asset investing platform. Masterworks even recently added a secondary market, too, where investors can trade shares in paintings.
Meanwhile, its research team works in the background to calculate appreciation rates, correlation and loss rates. The platform stands out especially for using propriety data to determine which artist markets have the most momentum, focusing on the very high-end segment of the art market that has predictable returns, the company says. The company says it launches about one new painting every four to five days. Shares of the painting are then made available for purchase on the Masterworks website for as little as $20 per share. Masterworks will purchase a painting and file it with the SEC as a public offering, or IPO, similar to how a company goes public.
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