Have you ever fantasised about owning an original painting by Warhol or Banksy? Then historically, you’d have had to part with millions of pounds for the privilege, and while your bank account might be more than good for it, it’s a larger sum to invest in a piece of artwork than many would be keen to pay.
Enter, a new and exciting concept for art enthusiasts, which comes in the shape of an investment platform called Masterworks. Although not entirely new to the scene, having originally launched in 2017, it’s making waves in the art collectors world currently because it has paved the way for fractionalised ownership of blue-chip art – which means rather than splashing a huge sum in order to get your hands on the painting or sculpture of your affection, you could potentially own a share in it in exchange for a much smaller upfront investment.
There are numerous facets of the multimillionaire lifestyle that are appealing, outside of the basic ability to go through life never having to worry about bills. From splurging on private planes, stunning sports cars, and enormous homes to luxury holidays and even private islands, we all have our favourite ways to spend – and thanks to Masterworks, you can enjoy some of the world’s finest pieces of art without having to compromise on the other luxuries you love.
A passion for fine art is common amongst the uber-rich – something that is touched upon in Hollywood blockbuster film “Wall Street”, which sees characters relentlessly boast about the appreciating value of their world-renowned collections. But it’s not just fictional prosperous characters who have fallen in love with the wonder of art investing, with world-renowned entrepreneurs like Robert Soros and Jeff Bezos having been vocal about their love of the art world too.
Blue-chip art has, for many generations, been a valuable alternative asset class for investors, helping billionaires to hedge their investments, secure their portfolios, and cement their social status along the way. But while the best of the art world was once only accessible to the richest of the rich, that’s slowly changing.
As Masterworks continues to garner interest amongst amateur art-collectors around the world as well as piquing the interest of more experienced investors, here, we take a look at just why art investment has become such a popular route for those with money to spare over the years, and how this intriguing new concept is changing the game.
Why do the ultra-rich invest in art?
There’s no denying that fine art is a major status symbol. Few things have the power to add a sense of opulence to your already luxurious home quite like a Basquiat piece on your dining room wall – and a well-chosen piece by a renowned artist is something that is certain to impress your guests. An art investment gives multi-millionaires a unique opportunity to elevate their social standing, improving their reputation with peers, and within society as a whole.
However, investing in art isn’t just a status move for the well-to-do. It’s also a smart, strategic investment choice. The value of art, particularly blue-chip, high-value art, moves independently from the stock market, giving wealthy individuals an opportunity to diversify their portfolios and hedge against inflation in times of economic uncertainty. Essentially, art’s unique ability to retain its value, even during times of turmoil, makes it a valuable security asset.
At the same time, the potential for high returns in the art world means art enthusiasm can help the rich get richer. Though art might not deliver the same rapid returns as some riskier alternative assets like cryptocurrency, it does consistently appreciate in value – provided you’re investing in the right pieces, that is.
Studies show that blue-chip art has outperformed the S&P by more than 250 percent since the year 2000. What’s more, between the years of 2022 and 2023, the art market grew in value at a CAGR of 31.4 percent, making it an attractive opportunity for virtually any investor.
Art doesn’t just allow wealthy individuals to showcase their incredible lifestyle to the world and invest in their passions. It also offers an opportunity to consistently increase affluence, and preserve assets in uncertain market conditions – so it’s easy to see its appeal.
The rising passion for art investment
Anyone with a love for luxury living knows there’s plenty to be learned from the ultra-wealthy – even if you’re already one of them.
World leaders in banking and finance have shown us how to create the ultimate vacation experience, decorate our homes with enthusiasm, and explore our passions.
Now, they’re also showing us how to diversify our portfolios in the investment world, with assets that appreciate more rapidly and dependably than anything else. In 2021 alone, the Jean-Michel Basquiat painting “In this Case” proved the value of art investment, selling for $93.1 million.
Unfortunately, while billionaires can leverage their influence in the art world and their endless resources to build incredible galleries, not everyone can afford to take the same approach.
The average investor, even one with a relatively large amount of capital to spend, will often find it difficult – or in some cases, simply unfavourable – to invest in artwork with multi-million dollar values. But fortunately, there is an alternative way for people from all backgrounds to imitate the investment tactics of the ultra-rich – which as we mentioned, comes in the form of Masterworks.
Tokenisation and fractionalisation in investment have emerged as a common concept in recent years, offering people from any walk of life the opportunity to purchase a fraction of an ultra-valuable asset rather than the entire piece. Masterworks has leveraged this concept to democratise the art world, making high-value paintings more accessible to the masses, and for art lovers around the world, it hasn’t come a moment too soon.
Invest like a multi-millionaire
Masterworks is a passion project that was inspired by CEO Scott Lynn’s insight into how his own art collection appreciated in value, year after year. Lynn believes everyone should have the opportunity to invest like the ultra-wealthy, and leverage the diversification benefits that come with art – and the platform allows users to do exactly that.
Masterworks is simple enough to understand and use to your advantage. Investors sign up for an account and purchase pieces of art in a way that is similar to buying shares in a company – a process that has been made possible through Masterworks’ purchasing of blue chip art pieces, which are selected using the company’s proprietary data analysis methods, and then filed as securities with the SEC.
This allows the company to break the value of each piece down into shares, which can be made available to purchase on the Masterworks website and mobile apps. Investors share available returns on these investments when Masterworks eventually sells the full art piece. For instance, in 2019, the company bought a Banksy Mona Lisa painting, selling it a year later for a 32% profit – and all owners of a fractionalised share in it profited handsomely as a result.
Members of the Masterworks platform can also trade shares of paintings with each other, building their own portfolios based on their own passions and interests and making for a dynamic community of like-minded art lovers where there’s money to be made and enjoyment to be taken out of the process along the way.
The new approach to art investing
For generations, trading in art has been a high-performing investment channel for the ultra-wealthy, capable of driving not only an increase in social status but also enhanced portfolio diversification and security.
However, for many buyers, the concept of purchasing their own timeless work of art has always been little more than a pipe dream, which is where Masterworks has changed the game entirely.
While investing in shares of a Sam Gilliam or Claude Monet painting on Masterworks might not allow you to hang an iconic canvas on your wall, it does give everyone an opportunity to unlock some of the additional benefits that art investment can bring.
With Masterworks, anyone can invest in legendary art pieces, for as little as $20 per share, and count themselves among the billionaires worldwide who have already discovered the benefits of art investment.
Disclaimer: Investing money carries risk, do so at your own risk and we advise people to never invest more money than they can afford to lose and to seek professional advice before doing so.