Fine art has exhibited strong risk-adjusted returns while remaining relatively uncorrelated with other major asset classes.
But if you have a limited amount to invest — say, $10,000 — what are your options?
Below, we break down the possibilities to help our readers make an informed decision about investing in art and how Masterworks is changing the industry.
An Original Artwork by a Lesser-Known Artist
Paintings or sculptures in the $10,000-and-under range are typically by artists who have not gained significant traction in the mainstream market.
As such, their works do not have a reliable secondary market and the inherent track record to help assess resale value. These works would typically be purchased from a gallery or directly from the artist.
The most difficult aspect of buying an original work in this price range is sifting through the multitude of emerging artists, where little to no prior sales data are available because the works are offered privately.
Therefore, the buyer must carefully research the artist’s prior exhibitions, awards and collectors, both institutional and private, to understand their potential and how they stack up against similarly priced peers.
The chances that a $10,000 painting will increase in value are relatively low, so finding one that becomes the next million-dollar sale is on par with the odds of winning the lottery. As an investment, therefore, this category is extremely high-risk and speculative.
Additionally, if you are buying a single piece for investment purposes, your art holdings are completely undiversified, which makes the odds of having a golden ticket even lower.
A Print Edition by a Well-Known Artist
Collectible prints or multiples run in limited editions that can range from a series of two or three to a run of thousands.
While this is an affordable way to own something by a well-known artist, the prospective acquisition must be thoroughly researched to ensure that you are paying a fair price and the print is rare enough that it has scarcity value.
Editions can be tricky to research because their ownership history, or provenance, can be difficult or impossible to establish, even when buying through public auction or a reputable gallery.
In order to estimate the value of a print and its prospects for future appreciation, due diligence must be performed to assess past results for similar pieces by the artist.
Additionally, since you will not be the first owner of the work, you need to ensure that it is in excellent condition, so that your investment is secure.
The prices of editions remain fairly stable, because they trade with relative frequency in the market.
According to a research paper published by University of Toronto economist Dr. James Pesando, in the 25 years of sales he tracked, modern prints had a real, or inflation-adjusted, return of approximately 1.5% on an annualized basis.
Fractional Ownership of Works by Blue Chip Artists
Masterworks seeks to become the first company to allow investors to purchase shares in investment-grade art and simplify the process for diversifying portfolios with an alternative asset.
In order to do so, Masterworks acquires “blue chip” artworks from the major auction houses, with a focus on those representative of an established artist’s mature style.
As a result, with $10,000 an investor will have the ability to build a diversified portfolio of sought-after objects by buying shares of several multimillion-dollar artworks.
Industry experts at Masterworks conduct all of the relevant research and only acquire works that meet a specific set of criteria.
The offerings are then filed with the Securities and Exchange Commission and the documents are made available to investors online.
For an artwork to meet Masterworks’ acquisition criteria, there must be enough publicly available auction sales records for similar objects to gauge fair market value and historical appreciation.
Accordingly, only those works that have an estimated price accretion between 9–15% annually are targeted.
In this way, Masterworks seeks to optimize the risk-reward profile for investors while ensuring that the price paid for a work is at or below fair market value.
In short, while some have the skills and knowledge to acquire individual pieces, others may find that it is demanding and inefficient, not to mention the additional hassle of setting up tax-efficient vehicles, arranging for insurance and storage and deciding how and when to liquidate the investment.
To radically simplify the process, Masterworks has created a new platform that allows investors to purchase a diversified portfolio of shares in blue chip art with the click of a mouse.
Current (and Near-Future) Offerings
Right now members can buy fractional shares of this painting by Claude Monet…
As evidenced by the artist’s signature and date on the lower right corner of the canvas, Coup de vent, or Gust of wind, is one of four known oil paintings completed by Claude Monet on one particular trip to Normandy in the late summer to early fall of 1881.
Since 2013, Monet has consistently ranked as one of the 10 best-selling artists, with over 100 years of auction history to solidify his position as one of the greatest artists of all time.
In 2018, his sales at auction came second only to Pablo Picasso and exceeded those of Zao Wou-Ki, Jean-Michel Basquiat and Andy Warhol. In Masterworks’ research, Monet’s work exhibited relatively predictable returns with low volatility
Immediately prior to purchase, Coup de vent was appraised for $8.5 million by a third-party appraisal firm. Historical performance of similar works is approximately 9.27%.
Coming up, we have a painting by American painter Alex Katz titled Maxine.
Born on July 24, 1927, in Brooklyn, New York, Katz attended the Cooper Union School of Art and the Skowhegan School of Painting and Sculpture as a young man.
During the mid-1950s, Katz fell into the small circle of artists known as the 10th Street Scene, which included Lois Dodd, Larry Rivers and Fairfield Porter, among others.
Over the following decades, he developed his hallmark stylization through experimenting with collaged paper and aluminum cutouts.
Regarding his signature style, Katz once remarked, “We compete for audiences, as artists. I’m competing with the abstract expressionist guys. I’ll knock ’em off the wall. If you put my work next to an aggressive A.E. painting, I’ll eat most of ’em up. And I want to compete with the kids. I’m there with the kids.”
And he is.
Having achieved widespread critical acclaim and commercial success — his median return is 13% over the last seven years — Katz’s work serves as a beacon to younger generations of artists.
P.S. I don’t know about you, but option No. 3 is my favorite. Luckily enough, it’s also the easiest one to put into action. All you need to do is click here and get yourself registered with Masterworks.
As soon as you’re registered, Masterworks will reach out to you with a real, live person — ready to help you craft your own investment portfolio.
Which can, of course, include the Katz piece that’s about to go live… which, as a member, you’ll get first crack at. All you have to do is click here now.
Ryan Cole is the editor-in-chief of Unconventional Wealth. He’s been covering the alternative investment space for nearly a decade and writing about finance and investment for almost 20 years.
Ryan has walked the walk for years, living a very unconventional life. He’s led snowmobile tours through the mountains of Colorado, settled in Japan for five...