Launched over four years ago, Masterworks is well regarded as the first-ever fractional art investment platform, bringing together two concepts which have been around for a while: fractionalized investment, which splits high-ticket assets into a number of more affordable shares, and investing in blue-chip art as an asset class.
While the combination of these two concepts is novel, each one unto itself is well-established. Mutual funds, ETFs, REITs, and more are all based on the idea of fractional ownership.
Investing in art has been around even longer, as Scott Lynn, founder and CEO of Masterworks points out. “Public auctions in the art market had been happening for centuries,” he says, “but for whatever reason nobody’s ever really built an investment product for the asset class.”
Masterworks changed the conversation around art investments by allowing people to own fractional shares in blue-chip paintings. This makes it possible for retail investors to participate in the previously closed and exclusive world of art investment and benefit from the outsized returns of this alternative asset.
Lynn notes that “Masterworks is the first way for anyone (both small and large investors) to gain exposure to art without spending millions on a painting, or tens of millions building a portfolio.” However, as the platform has caught on, Masterworks now faces competition from new art investment platforms that also see the benefits of its approach.
While Masterworks will always be the first, is it still the best? Or can these new upstarts overtake Masterworks? Read on for a deep dive into three new platforms.
Artex Stock Exchange
Established in 2020 by H.S.H. Prince Wenceslas of Liechtenstein and Yassir Benjelloun-Touimi, Artex Stock Exchange aims to serve as a regulated stock exchange for artwork. Each art item will be turned into a public limited liability company incorporated in Luxembourg, and shares in that company will be traded on the Artex exchange. The artworks themselves will be exhibited in museums around the world.
Artex’s first IPO, Francis Bacon’s “Three Studies for a Portrait of George Dyer,” is taking place in autumn 2023, with shares available for $100 and shareholders limited to a 10% stake in any single work.
Artex invests only in iconic works by famous artists from the Renaissance to the mid-20th century. It’s a different approach to Masterworks, which uses data analytics to seek out individual artworks by largely post-World War II artists most likely to appreciate in value. Its data-driven approach isn’t replicated by other art platforms, including Artex, which relies on the expertise and instincts of its board.
While Masterworks also offers a secondary marketplace where people can trade shares in artworks, it’s not the primary focus. Masterworks concentrates on helping retail investors profit from long-term art sales, sourcing works below market value and selling them years later for a profit. In contrast, Artex investors can only profit by buying shares low and selling them high.
This raises concerns about Artex’s viability. Regardless of the asset class in question, stock and share prices generally fluctuate because of new developments in the company or the market, which change the way investors value those holdings. Art, however, can only appreciate if the reputation of the work or the artist changes, and that’s less likely to occur with established works.
Mintus
Mintus is a UK-based fractionalized art investment platform, which, like Masterworks, sells paintings once their value has increased and shareholders receive a portion of the profits. Unlike Masterworks, Mintus doesn’t offer a secondary market for trading shares.
Mintus is also opening the doors for investors to access high-quality artworks that would otherwise be out of their reach. However, it deliberately excludes mass retail investors, selling shares only to institutional investors and accredited investors, with a minimum investment of $3,000. This sets the bar for entry higher than Masterworks or Artex.
Like Artex, Mintus uses the wisdom of its team of experts to choose which artworks to buy. The team considers a number of different metrics, including the artist’s reputation, previous sale prices, provenance, market trends, and more. That said, Mintus founder and CEO Tamer Ozman has told the press that the company is also developing an AI-based valuation tool.
Perhaps Mintus’ biggest weakness is the size of its portfolio. Three years after establishment, it has only two artworks to offer on the website, although the company plans to add up to 30 works by March. In contrast, Masterworks has bought 239 pieces and sold 13 of them since 2017.
Weng Art Invest
Weng Art Invest is a trading platform for tokenized limited art edition prints, sculptures, and photographs by world renowned contemporary artists, run by Germany’s Weng Fine Arts group. Weng Art Invest sees limited editions as a way to manage a more transparent art platform, since they are authentic works and often more liquid and tradeable than other artworks.
Unlike other online platforms for investing in physical art, Weng investors own the entire piece of art as a digital token. After 12 months, they can redeem the token and receive the physical artwork. Otherwise, they can hold onto it in token form, or sell it back to Weng Art Invest. This ability to gain complete ownership of contemporary artwork makes Weng Art Invest unique. It’s certainly quite different to Masterworks, which focuses on fractional ownership of unique works.
Weng Art Invest is still small, with trading only open one day a week and no secondary trading market, but the team behind the platform has big plans. The company intends to expand to allow trade in all digital twins of physical artworks, and enable owners to trade their tokens on other platforms too.
Early investors appreciate that it’s easy to use and does a lot of the legwork for collectors and investors. The platform accepts payment in EUR, USD, and CHF, and handles everything involved in purchase, transportation, and storage.
Masterworks still stands out from the competition
Each of these three challenger art investment platforms has its advantages and shares some of the features of Masterworks, but Masterworks still has unique selling points that are likely to continue attracting investors.
Its performance record is so far unmatched, with the platform having generated $25 million in payouts in 2022 alone and producing net returns as high as 35%. While other platforms are seeing investor appetite fade in the wake of inflation and interest rate hikes, spokespeople from Masterworks have said that the company expects capital to grow at least 50% in 2023, as the market matures and serious art investors choose it in preference to smaller players.
Ultimately, your choice of art investment platform depends upon many things, like which types of artwork you want to invest in, how important the opportunity to resell shares is to you, and whether you want complete or partial ownership of pieces of art. But as the original fractionalized art investment platform, Masterworks still makes a strong argument for being the best.
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
Known for identifying cutting edge technologies, he is currently a Co-Founder of a startup and fundraiser for high potential early-stage companies. He is the Head of Research for Allocations for deep technology investments and an Angel Investor at Space Angels.
A frequent speaker at corporations, he has been a TEDx speaker, a Singularity University speaker and guest at numerous interviews for radio and podcasts. He is open to public speaking and advising engagements.