Arete Wealth, a broker/dealer, registered investment advisor and insurance firm, has signed a two-year agreement with Masterworks, a platform for investing in art securities, to be the sole managing broker/dealer and distributor for Masterworks securities. As part of the deal, Arete will open a New York City office; 50 Masterworks employees will become Series 7–licensed via Arete and work out of the New York branch.
Masterworks securitizes single pieces of art through Regulation A+, a framework for capital-raising that was created under the JOBS Act, and functions similar to a traditional IPO.
“Masterworks is now the single largest filer of Reg A+ securities offerings in the United States, meaning that each painting that Masterworks is securitizing is its own unique Reg A+ offering,” said Joshua Rogers, founder and CEO of Arete Wealth. “It started to become really evident that Masterworks really was going to need to partner with a broker/dealer that not only could help them with interfacing with the regulators, but also had some expertise in arts as an asset class. And so that's basically how we came together.”
Arete has its own Art & Wine Advisory group, which includes professional art advisors that help clients build their own art collections as part of diversified portfolios.
Also as part of the deal, Arete advisors will distribute Masterworks’ new Diversified Art Portfolio, a Regulation D private placement available for accredited investors only. Initially, that fund will be available only through Arete and Center Street Securities, another b/d it owns, but the firm is considering distributing the fund to other RIAs, independent b/ds and wirehouses, Rogers said.
Masterworks buys blue-chip pieces from artists including Banksy, Kaws, and Basquiat, and then securitizes them, allowing investors to buy minority stakes in those works of art on its website. It charges a 1.5% management fee.
The new Diversified Art Portfolio will hold percentages of 30 or 40 different paintings that have already been securitized, Rogers said.
The relationship with Masterworks gives Arete clients different tracks to choose from for getting exposure to art as an asset class.
“You can invest in art by working with the Arete art advisory division and actually building your own collection that you're going to live with and doing it that way,” Rogers said. “Some people might not necessarily want to really get into art collecting and everything that's involved there, so they might just want to invest in art as a pure asset class. And so in that way, the Masterworks relationship is perfect.”