By Dora Grossman-Weir
Masterworks vs Fundrise: The Best Alternative Investment Platform in 2024
The most commonly given financial advice in our world of increasingly erratic markets is probably to diversify your portfolio. In addition to spreading investments across different sectors, many investors are turning to alternative investments as a way to protect against volatility.
Two platforms that are generating buzz are Fundrise, a Washington, D.C.-based company founded in 2012 that offers fractional investments in the real estate market, and Masterworks, a company founded in 2017 aiming to make the art market more accessible to investors both seasoned and green. Both platforms have been written up by the likes of Time Magazine, Fortune, and Business Insider. But what is the customer experience on these platforms truly like, and how do the returns pan out?
We’re going to break down the pros and cons of each platform to help you decide which would better serve your investment needs.
Each Platform In Brief…
First, some background on each platform. Fundrise is a leading real estate investment platform, which allows users to invest in high-quality real estate at a low cost. Real estate, historically one of the best performing investment assets, traditionally hasn’t been available to most individuals. Between the high buy-in requirement and the fees and middlemen required to purchase property, it can start to feel like less of a ‘blue chip’ and more of a headache.
Fundrise’s main products are real estate investment trusts, or REITs. These trusts generally invest in income-producing real estate, whether through managing buildings or by holding mortgages.
Masterworks on the other hand is the leading firm for buying and trading shares in another alternative market: Fine Art. Masterworks has a team of researchers and specialists that pick and choose the most strategic artworks to acquire and securitize. Users can then invest in a portion of the work (or works) of their choice– recently, the sales of pieces from the likes of Yayoi Kusama, Claude Monet, and Banksy have had returns between 9.2%-32.0%. It’s the first platform to offer entry-level access to multi-million dollar pieces in the contemporary art market, a market that has outperformed the S&P for the past 26 years.
Now that you’re familiar with the platforms, here is how they compare over a couple key categories:
Returns
F Fundrise has had overall neutral to positive returns since its inception in 2012. That said, this past year the returns dipped slightly, ending at -3.21% through Q3 of 2023.
MW Masterworks has an incredible return rate–their 22 exits to date have all been positive, driving returns of up to 77%. Additionally, historical returns for most of the Masterworks artists range from 12.70% to 19.80%.
Accessibility
F Fundrise is a champion of accessibility in investing, with the low entry point to invest at only $10. Plus, similar to Masterworks, Fundrise has both a website and a user-friendly app for Android and iPhone.
MW Putting the ‘access’ in accessibility, Masterworks provides unparalleled access to top collectors and pieces that wouldn’t otherwise be possible for the average investor. Users complete a 1:1 call with a financial advisor, where they can discuss topics like risk tolerance, investment style, and minimum investments.
Correlation to other markets
F Fundrise does a great job of mitigating market volatility. As of September 2023, the Fundrise Flagship Fund was down 6.7%, whereas the Vanguard REIT ETF, called VNQ, was down 30.2%.
MW The art market is an asset class with famously low correlation to other markets. It’s also a great way to protect your assets from from inflation – in recent data obtained by Masterworks, when inflation is above 3%, contemporary art prices appreciate by 23.2%. This growth rate far exceeds alternative hedges such as crypto and real estate.
Membership Fees
F Fundrise has slightly differing fee structures depending on the nature of your investment: for all customers, Fundrise charges a 0.15% advisory fee, Fundrise’s real estate funds have an annual 0.85% flat management fee and the ‘Fundrise Innovation Fund,’ which invests in a portfolio of private technology companies, has an annual 1.85% flat management fee, the equivalent of $18.50/year for every $1,000 invested.
MW Masterworks charges a 1.5% annual management fee in the form of equity, and they also charge 20% of net profits from exits. However, both of these fees are only charged when a painting is successfully sold.
Whether through Fundrise or Masterworks, diversifying your portfolio with investments in alternative markets is a great choice for individuals looking to mitigate volatility in their portfolios and increase returns. And while Masterworks’ recent returns have been more impressive, both platforms present a great opportunity to invest in valuable and previously inaccessible asset classes.
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by Dora Grossman-Weir