Investing in fine art (e g. Masterworks)

older_and_no_wiser

Does anyone have experience investing in fine art as a diversified asset class? There are platforms like Masterworks where you can buy in a 'share'of art pieces which the company claims they have researched and have a good probability of making high future returns on the market.

Millyonare

Alternative investments -- such as fine art, old wine, or rare sneakers (trainers) -- are very trendy right now. Some call them "the new crypto".

Among the biggest challenges are:

1. Low consumer protection
2. Low liquidity
3. High fees
4. Uncertain valuations

For example, there is no FSCS protection if one part-buys a £50k painting that turns out to be a fake.

It is a risky / riskier investment category.

adindas

Millyonare said:

Alternative investments -- such as fine art, old wine, or rare sneakers (trainers) -- are very trendy right now. Some call them "the new crypto".

Among the biggest challenges are:

1. Low consumer protection
2. Low liquidity
3. High fees
4. Uncertain valuations

For example, there is no FSCS protection if one part-buys a £50k painting that turns out to be a fake.

It is a risky / riskier investment category.

In my personal opinion the basic question to ask is that

Do you have skills or someone who you fully trust in possession of this skills to value it ??.

With high risky assets people should expect a much higher return.

older_and_no_wiser

To be honest, it's not something I had thought about much before but saw a recent YouTube video from Mark Tilbury on it and found it quite interesting and intriguing. 

eskbanker

older_and_no_wiser said:

Does anyone have experience investing in fine art as a diversified asset class? There are platforms like Masterworks where you can buy in a 'share'of art pieces which the company claims they have researched and have a good probability of making high future returns on the market.

https://en.wikipedia.org/wiki/Wikipedia:Mandy_Rice-Davies_applies

I'd humbly suggest aspiring to being both older and wiser, by researching more mainstream homes for your money that you can understand without having to rely on what an unregulated company chooses to tell you....

Amazin

I believe it's better to invest in companies with strong cash flow and great future rather something more speculative like arts and crypto. You don't need some much diversification if you invest in the right companies because you can also diversify in the range of different companies 

Aretnap

older_and_no_wiser said:

Does anyone have experience investing in fine art as a diversified asset class? There are platforms like Masterworks where you can buy in a 'share'of art pieces which the company claims they have researched and have a good probability of making high future returns on the market.

I have no idea about the bona fides of any particular company, so what follows is a general comment which is definitely not about Masterworks.

However in general this is an area which is rotten with scams. Not necessarily of the blatant "sell a fake/non existent painting, take the money and run" type, but certainly of the "buy a painting for £1000, commission an 'expert' valuation to say that it is worth £5000, and sell 50 shares to suckers at £100 a go" type.

If the "expert" valuation proves to be "over optimistic", that's just bad luck, even an expert can't be right every time, the "investment" company still gets its money and with it being an unregulated investment the unfortunate suckers have virtually no comeback, unless they can somehow prove that the valuation was fraudulent, as opposed to merely over-optimistic or wrong.

So how are you going to distinguish between a reputable company which will make you money and a dodgy scam outfit of the type I've just outlined? TBH, knowing naff all about the art market I can't make any useful suggestions beyond saying that YouTube videos are not a good place to start. And that unless you have the expertise to research the piece yourself, you should commission your own independent valuation of any artwork you are considering buying (shares in) and you should not simply rely on what the seller tells you it is worth.

TheWoodler

Fine art and antiques are both very specialist areas which require knowledge and training to authenticate works - connoisseurship, scientific skills and historical research (e.g. provenance) are all required. People build up knowledge and expertise in their fields - they know what’s genuine, what’s commercial, what’s unusual and what’s representative and common, so less likely to sell high or be collectable. 

And they’re all subject to the vagaries of fashion and new discoveries in terms of value, not to mention subject to stringent domestic and international laws - for example around provenance and export. Fakes are legion, and even experts argue and can be fooled. And how would you spot an up-and-coming artist without prior knowledge of the sector they work in? What a company like Masterworks tells you is a good name that they’ve invested in may not be what the market agrees with ultimately - don’t forget reputation either.

A number of years ago commercial UK  galleries were selling works by a well-known personality. They were well provenanced, by a household name, and commanded quite a high price as a result.

They’re worthless now. The artist was imprisoned in 2014 for crimes which have ended his career. 

All of this is to say this is *not* an area to invest in. Buy or collect things that you like and will enjoy looking at in your home - not with an eye to their potential value, which may not ever be realised, realised in your lifetime, or realised at the best price when you want to sell, because their time has passed or too many are now on the market etc. You’ll get the value of an artwork or antique in that enjoyment, not in a nebulous investment scheme where you don’t even have a chance of displaying it or selling it when *you* want to. 

Even billionaires proceed on that basis when it comes to art - they may have the money to bid for old masters that we lack, but they also have the money to employ good advisers and go to reputable dealers - but even for them the value lies in the work itself and often without any expectation of a financial return (eg willing it to the state or to a particular collection on death). 

Albermarle

As an alternative investment you could try NFT's ( Non Fungible Tokens) but be careful ....

The buyer of Twitter's first ever tweet by its founder Jack Dorsey for $2.9m (£2.1m) sees it as a wise investment.

Experts agree that the first tweet from the Twitter founder on his own platform is a highly valuable asset.

It was sold as a non-fungible token (NFT), a unique digital certificate that states who owns a photo, video or other form of online media

One Month later 

The buyer of a non-fungible token (NFT) of Twitter co-founder Jack Dorsey's first tweet says he "may never sell it" after receiving a series of low bids.

Malaysia-based Sina Estavi has been offered just over $6,200 (£4,720), about 0.2% of the $2.9m he paid for it.