Wealthy investors often look to collectibles such as paintings, wines and cars as a way to diversify, but experts say one overlooked category in this rarefied sector may be violins and other stringed instruments.
Violins and other fine stringed instruments—especially those made in early 18th century Italy by the likes of Stradivarius and Guarneri—have been prized investments for the wealthy for centuries, beginning in the courts and churches of Europe, said experts in a seminar at Mondomusica New York, an exhibition of hand-crafted string instruments in New York City, on Monday.
"Violins are an excellent choice for those who want an investment—or who want a bit of sizzle," said New York violinmaker Christophe Landon, one of the panelists.
In the past 10 to 15 years, interest has gone global as knowledge has been disseminated far and wide—thanks in no small part to the Internet. Transparency among dealers has increased as well, ensuring that accurate information about instruments is available to potential buyers, speakers said.
In recent years, price rises have pushed violins into a separate asset class. A Stradivarius that could be bought for less than $300,000 in the late 1970s today would start in the millions, according to accounting and advisory firm Grant Thornton.
This phenomenon reached stratospheric proportions in 2011 when Tarisio Auctions in New York sold the “Lady Blunt” Stradivarius for a breathtaking $15.9 million. The instrument was one of 19 Stradivarius instruments owned by the Nippon Music Foundation in Tokyo; proceeds from the sale reportedly went to Nippon’s charity for earthquake/tsunami relief. When Sotheby’s first put Lady Blunt on the block in 1971, it sold for $200,000 ($1.2 million in 2013 dollars), a return of 12 to 13 percent per annum, according to Bloomberg.
Demand for violins outstrips supply, with much of the demand coming from Asia, the panelists said. World-class musicians in Japan, Korea and increasingly China are seeking out the finest instruments, while those whose careers are just beginning buy their violins from fine local violin makers. In China and elsewhere, too, newly minted billionaires are looking for the next “passion” investment.
After the 2008 financial crisis, panelists said, high-net-worth investors turned increasingly to collectibles as a stable and safe investment. Research by Kathryn Graddy, a Brandeis University economist, supports this idea. It shows that auctioned violins have returned an inflation-adjusted average of 3.3 percent per annum since 1980. The research also shows that violins do not track market swings, and so are a good way to diversify an investment portfolio
Many investors are music lovers and amateur musicians, according to the speakers. They buy top-quality violins for their beauty and the sound they produce. Sometimes they co-own an instrument with a musician. Others may buy a violin outright or with co-investors and loan it to a fledgling or established professional player who cannot afford to buy it.
The Artist Rare Instrument Fund, a private equity vehicle that is raising $100 million, buys violins and holds them for various periods, according to Tony Finley, a partner in the fund and a seminar panelist. Some instruments will be sold quickly, he said; others will be loaned out through various agreements with musicians. Minimum investment in the fund is $1 million, with a five-year lockup.