Masterworks Review: How It Works, Safety, and Track Record
Research shows that a portfolio of 40% stocks, 30% bonds, and 30% alternatives can have higher returns and lower volatility than a traditional 60/40 stock-bond portfolio.
If you're looking for investments to fill that 30% alternatives bucket, you may be interested in Masterworks.
Masterworks gives retail investors access to fine art, an alternative asset that has generated strong returns, held its value during periods of inflation, and been a way to diversify outside of public markets for decades.
But is art the right investment — and is Masterworks the right platform — for you?
Here's everything you need to know about investing in art on Masterworks, including whether it's safe, how it works, pros and cons, and much more.
Skip the waitlist
If you sign up for Masterworks via its website, you'll be placed on a waiting list. Our readers can use any of the links in this article to skip the waitlist.
Masterworks review summary
- Overall rating:
- Asset type: Art
- Best for: Diversification, speculation
- Average return: 12.6% per year
If you're looking for a way to diversify your portfolio by investing in art without needing a lot of capital, Masterworks is a great place to start.
What is Masterworks?
Masterworks is an investing platform that enables everyday investors to buy and sell shares of fine art.
At a high level, the platform works by pooling together money from many investors (known as crowdfunding) and investing it in expertly vetted artworks that the acquisition team thinks will appreciate in value.
This process allows investors to buy individual shares of artworks worth up to $30 million.
While there are other platforms that offer art investing, Masterworks is the leader in the space based on assets under management and its wide investment selection.
Investment options range from artists such as Pablo Picasso to viral sensations such as Banksy.
Key figures
- Number of investors: 946,485
- Artworks purchased: 419
- Amount invested on the platform: $993 million
- Average return: 12.6% per year
- Minimum investment: $15,000*
- Investor fees: 1.5% management fee + 20% profit share
All figures are as of June 1, 2024.
Why invest in art?
As mentioned earlier, investors are buying alternatives to enhance their portfolios' returns and diversification. As an asset class, art checks both of these boxes.
Between 1995 and 2022, Post-War and Contemporary art — the categories Masterworks focuses on — have outperformed the S&P 500:
Source: Masterworks
The Artprice 100 index, which is comprised of the art market's 100 most successful artists based on auction revenue over the previous five years, shows similar performance between 2000 and 2023:
Source: Masterworks
This performance is especially attractive given that art prices demonstrated a low correlation with other asset classes over the same period:
Source: Masterworks
While past performance does not guarantee future returns, art's price appreciation and low correlation with other assets have made it a valuable asset for diversifying portfolios.
How does investing with Masterworks work?
1. Research
Masterworks' acquisition team, leveraging the data they collect, scours the market to see which artists have the most momentum.
After compiling their list, the team begins looking at each individual artwork created by each artist on their list, trying to find the best pieces at fair prices.
Due diligence
Fewer than 3% of artworks pass the team's due diligence process.
2. Acquire
Once the team is zeroed in on an artwork to purchase, they'll negotiate and buy the piece.
Once purchased, the art is transferred to a secure storage facility, where it is kept in a climate-controlled environment and insured for damage or loss.
3. Securitize
Once the artwork has been stored, Masterworks creates a special-purpose LLC and “securitizes” it with the SEC.
This allows individual investors to buy shares in the art on the Masterworks platform.
4. Investors buy shares
Once an artwork is made available on the platform, investors can buy individual shares in the art's initial offering, which lasts for 90 days or until it sells out.
According to Masterworks, shares are typically sold for $20 each. You can read more about investment fees and minimums in our “fees & investment minimums” chapter below.
Masterworks aims to hold each piece for 3–10 years or until the platform finds a good opportunity to sell it.
Holding periods
3–10 years is a typical holding period for many alternative investments.
5. Investors realize returns
There are two ways investors can sell their shares and realize returns:
- Masterworks sells the piece: The first way is to wait until Masterworks' private sales team sells the artwork out of its gallery. The platform will then distribute the proceeds of the sale, net of fees. It plans to hold each artwork for 3–10 years.
- Investors sell their shares: Alternatively, if you want to sell earlier, you can list your shares on the Trading Market, where investors can buy and sell shares amongst one another. However, there's no guarantee that you will find a willing buyer.
It's not uncommon for an artwork to lack liquidity on the Trading Market, so if you're going to invest, you should plan to hold the investment until the Masterworks team decides to sell it.
Track record
Masterworks was launched in 2017 and has sold 23 artworks to date.
Of those 23,
- Average return: 23.65%
- Highest return: 77.3% annualized net return (Cecily Brown)
- Lowest return: 4.1% annualized net return (Andy Warhol)
The average return of 23.65% is only of sold paintings. That figure does not include the appreciation of unsold paintings.
It's a safe assumption that the Masterworks team was opportunistic about these sales, so this average return is very likely higher than the average return of all artworks on its platform. The average holding period of these sales was around two years.
For this reason, and since Masterworks has been in business for fewer than 10 years and has only sold ~5% of the paintings it's purchased, I've used the Artprice 100's average return of 12.6% per year throughout this article.
Fees & investment minimums
Fees
Masterworks follows a hedge-fund-style fee structure and charges a 1.5% annual management fee on all assets invested on the platform.
This fee is distributed in the form of equity, which means you will not pay the fee with cash, though over time, your ownership stake will get diluted.
Additionally, the platform takes a 20% profit share after the sale of an artwork. This fee is applicable to any amount the painting sells for in excess (if any) of the initial offering price.
Masterworks has many costs (such as sourcing, acquiring, transporting, storing, and selling), which it must cover and earn a profit on top of.
These fees are in-line with other alternative investment platforms. Still, the industry's fees are much higher than traditional investments such as an index fund.
*Investment minimums
Technically, Masterworks' stated minimum investment is $15,000. However, this minimum can be (and is often) reduced by your account manager.
Some members have made their first several investments with only a few hundred dollars.
It seems Masterworks leaves this to the discretion of your account manager/advisor. If you tell them your situation and that you only want to allocate a certain percentage of your portfolio to art, they'll likely work with you.
Pros and cons of Masterworks
| Pros | Cons |
| Strong historical price appreciation | $15,000 minimum investment (may be negotiable) |
| Diversification | High fees, similar to hedge funds |
| Handles the sourcing, acquiring, storing, and selling on your behalf | Fairly illiquid |
| Has the best selection of art investments | Fairly speculative |
| Available to all investors | Required phone interview |
| Easy-to-use platform (desktop and mobile) |
How to become a member
Anyone can become a member and start investing in art on Masterworks.
International investors
Masterworks is available to international investors. That said, the Trading Market is only available to U.S. investors.
After creating an account, you'll need to schedule a phone interview before you can invest on the platform. This is required to comply with regulatory obligations.
The call will last about 15 minutes and covers a few things:
- Know Your Client (KYC): This brief summary of your financial profile includes how much you are able to invest, when you want to invest, your profession, and a few other details.
- Suitability: Masterworks will walk you through its investment process and ensure you have a thorough understanding of the investment.
- First transaction: They will help you make your first investment purchase.
After your first investment, you will be able to invest independently of the Masterworks team.
If you sign up on Masterworks' website, you will be put on a waitlist before you can begin the member process. Our readers can skip the waitlist with the link below:
Is Masterworks legit?
Yes, Masterworks is legit.
To securitize a piece, Masterworks must set up a special-purpose LLC. After it's registered with the SEC and securitized, shares are made available to investors.
Masterworks works closely with the SEC for this entire process and is subject to the SEC's oversight. Each investment must pass a number of regulatory hurdles before it becomes listed for purchase on the platform.
That said, Masterworks is not subjected to near the level of scrutiny of a broker-dealer, and doesn't have the same safety nets as a FINRA-regulated, FDIC-insured U.S. brokerage.
Every investment on Masterworks is a real, physical piece of art. The platform does not invest in NFTs or other digital assets.
Furthermore, the Masterworks website notes that each artwork is expertly vetted before it is acquired and that fewer than 3% of all analyzed pieces are purchased.
However, art is a speculative investment. As a collectible, the value of art is based on the tastes and preferences of its collectors, which often change over time.
Final verdict
As a platform, Masterworks is best for investors who already have a portfolio of traditional assets and want to diversify further.
It can be exciting to invest in alternative assets like art because they have the potential to appreciate sharply.
However, they should be kept in their rightful place — that is, as a minority component (think 5–10%) of an overall portfolio.
If you:
- Are already invested in stocks,
- Want to diversify your portfolio further,
- Have a high risk tolerance,
- And don't mind the lack of liquidity,
You may be ready to join Masterworks and add some art to your portfolio.
