Investment

Investing in fine stringed instruments: a unique asset class

The investment in high-quality stringed instruments, as a rather unknown asset class, offers private and institutional investors an extraordinary alternative in the area of real asset investments.

Auctions repeatedly confirm the value of selected musical instruments and let stringed instruments as an investment move into the focus of investors. This is also the case with the current auction of a Stradivarius, the so-called MacDonald viola, scheduled to run until the end of June 2014, with a minimum bid of 45 million US dollars. Certainly an exceptional situation, because in contrast to violins, only ten Antonio Stradivari violas still exist. But the trend towards high-quality stringed instruments can be observed internationally. Due to the increased interest from Russia and Asia, the demand for first-class stringed instruments now far exceeds the supply.

The advantages of the string instrument asset class, which are unique in this combination, should be mentioned: a consistently positive performance over decades, the low correlation to other asset classes, the low annual costs (incl. insurance), the easy mobility of the investment object and the "pleasurable return". in the form of private concerts. These advantages are met by both historical and contemporary stringed instruments of the highest quality.

In addition to the good historical returns and the low potential for losses so far, we like string instruments above all because they represent values outside of the regular paper money system. Unlike a fixed deposit, a violin will always have some value, whether in the context of our current or future monetary system. Of course, nobody guarantees that this value will always be higher than the purchase value. But it is precisely the certainty of holding a value in one's hands, independent of the state, central bank and economic system, that is decisive.

In addition, stringed instruments are also so interesting because they are comparatively mobile as valuables. Similar to physical gold, a violin or viola can be transported from one place to another without any problems and very cheaply. Real estate, many works of art and some vintage cars, on the other hand, are not mobile at all or only to a very limited extent.

Added to this is the low correlation to other investment classes. While stock, commodity and bond markets have historically shown fairly strong interdependencies, string instrument prices have tended to be independent of these markets. Violins & Co. therefore appear to be the ideal addition to a diversified portfolio of different asset classes.

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Choosing the right instrument is crucial

As nice as historical returns may sound, not all instruments increase in value equally. Choosing the right level of quality is crucial to the success of investing in stringed instruments. Many factors play a role in this, e.g. the builder, the geographical origin, the year of manufacture, the current condition, the sound, the appearance and also the history of the personalities who played the instrument. For the layman, these points are difficult or impossible to assess sensibly, which is why investors should always seek talks with one or more experts before making a purchase.

Due to the media coverage, the general public found out about the interesting returns on stringed instruments, especially in connection with the auctions of the 600 to 700 instruments by Antonio Stradivari that still exist. In fact, the instruments he built are more of a luxurious tip of the iceberg, because there are a number of old and modern violin makers with high-quality instruments that promise attractive increases in value over the next few years and decades.

Therefore, do not run to the nearest music store just to be able to quickly put a violin in the living room cabinet. You will certainly be happy with it, but most likely not in the sense of a long-term and profitable investment. There is nothing wrong with buying on your own, but then you should have a certain basic knowledge and talk to experts. In addition, there are also specialized providers who provide targeted instruments to investors and have both the necessary knowledge and the crucial network for this.

The type of use can also be important for the development of the instrument. One or the other violin has certainly become famous (and valuable) because it has been played by a famous violinist for years. Of course, not everyone has access to such personalities, but up-and-coming talent and lesser-known musicians can also help shape the history of an instrument.

 

 

Left: violin by Michele Deconet, centre: cello by Vincenzo Jorio, right: violin by Pierre Pacherel (Photos: Jan Röhrmann)

An investment in this asset class is possible both in the form of an individual investment and through an investor community. The cost of an "all risk" insurance is between 0.30 percent and 0.90 percent of the market value.

For the performance of stringed instruments, the period under consideration goes back to 1907 (see chart 1). The valuation is based on the standard work on the development of the value of stringed instruments, the so-called Albert Fuchs Taxe. The 17th edition of the tax is expected to appear in 2015. Then the existing charts and performance indicators will be updated again.

Stradivarius and Guarneri: When an outstanding instrument meets an extraordinary musician, more than just music is created. The instruments made by A. Stradivari and G. Guarneri del Gesù form the pinnacle of this craftsmanship, which moves the senses and takes the listener into a world of their own. Even during the lifetime of the masters, these instruments were something special and expensive; they are also of great art-historical importance today.

Appreciating up to 23% annually, these masterful instruments represent the pinnacle of stringed instrument investment opportunities. The best-known example of this is the auction of Antonio Stradivari's violin "Lady Blunt" from 1721, which changed hands in the summer of 2011 for around eleven million euros. Other records followed and transactions over 20 million euros have already taken place.

The extraordinarily beautiful and inimitable sound of these instruments in combination with the low availability on the market offer the investor above-average annual returns. With its excellent international network, ARTES fine violins also enables interested parties to invest in this class of instruments. Sensitive and discreet processing is the top priority for everyone involved.

Master of their trade

In addition to the two great Cremonese A. Stradivari and G. Guarneri del Gesù, other masters are also suitable for investment, whose instruments with average returns of 8 to 10 percent represent an attractive investment.

These instruments, with valuations of up to one million euros, often offer attractive opportunities for capital investments, since demand is constantly increasing here too. Here the demand is also strongly supported by musicians who are not able to acquire the most expensive instruments with their income.In 19th-century France, it is the instruments made by masters such as A.S.Ph. Bernardel, P. Pacherel, H.C. Silvestre and J.B. Vuillaume, which deserve special attention.

Italy, as the cradle of the heyday of violin making, not only produced the two best-known masters, but also such important names as C. Bergonzi, G. Grancino, G.B. Guadagnini, P. Guarneri and G. Guarneri filius Andrea, D. Montagnana and F. Rugeri. In the 19th century, it was above all G. A. Rocca, GF Pressenda and L. Ventapane, which were distinguished by their special quality and, with average returns of 8% to 12%, represented an attractive investment.

In the 20th century, modern Italian violin making produced numerous excellent instruments. Especially in the first half, contemporary violin makers such as Hannibal Fagnola, Giuseppe Ornati, Carlo Giuseppe Oddone, Leandro Bisiach and Gaetano Sgarabotto created extraordinary pieces.

The high esteem for modern instrument making is expressed not least in the average double-digit value development, with the initial investment being 25,000 euros. Alessandro di Matteo and Alessandro Ciciliati are examples of the value development of the instruments of two contemporary violin makers (see graphic 2).

In Switzerland, too, we find outstanding masters of instrument making, such as Philippe Girardin from Neuchâtel, with an international reputation and remarkable price developments (see chart 3).

The independent works by contemporary masters such as Francesco Toto, Davide Sora, Alessandro Ciciliati, Silvio Levaggi and Kolja Lochmann have an individual and recognizable signature. The high esteem for modern instrument making is also expressed in the average double-digit value development.

Investing in an instrument can be combined with talent development by lending the instrument to a young soloist. The highly gifted musician is given access to an instrument that optimally supports his playing skills and thus actively promotes his musical career. A number of foundations are also active in promoting talent, including the German Musical Instrument Fund.

Conclusion: high-quality stringed instruments represent a unique asset class within the capital market, because the crisis-proof return of 8 to 15 percent p.a. in connection with the targeted promotion of culture and talent offer a unique combination of making a difference with the capital investment. ARTES fine violins has many years of experience in this limited market, qualified access and bundles this in a specially developed investment seal. Investment-suitable instruments at prices ranging from 25,000 euros to several million euros are pre-checked and thus form a solid basis for the investment decision.

...and the bow?

The bow is a very little discussed class. Bows are special and enjoy some advantages over violins on the market. Bows tend to cost less, making them more accessible, requiring less storage space, and while musicians can afford an instrument or two, most own numerous bows. So the demand is much higher. Bows offer more for the money invested: it becomes very difficult to buy a very good violin at 15,000 euros, whereas with bows it is possible to find top quality bows from these prices. In addition, the number of well-preserved classical bows is also very limited.

 

Chart 1: The performance of violins by Italian and French luthiers since 1907, converted into euros (source: Violin Assets, Fuchs-Taxe). Since the 1980s, global interest has increased significantly, among other things due to the continuously high demand from Asia and Russia (source: Violin Assets)

 

Chart 2: The performance of the instruments of Alessandro di Matteo and Alessandro Ciciliati, two contemporary violin makers (Source: Violin Assets)

 

Chart 3: Performance of Philippe Girardin 1995-2015 (Source: Philippe Girardin, ARTES fine violins)

 

Chart 4: Performance of Italian Masters 1995-2012 (Source: Violin Assets, Fuchs-Taxe)

 

Graphic 5: Case study: price development - 3 violins from the top class - Gibson Stradivarius / Lord Wilton Guarneri /Mary Portmann Guarneri 1911 -2001 (Source: Investrad) *Price adjusted for purchasing power

 

Chart 6: Dow Jones Industrial Average vs. Rare Stringed Instruments, 1960-2006 (Source: Investrad)

 

Chart 7: DJAI vs. Rare Violins 1960-1996 (Source: Stradivari Invest, A. Fuchs-Taxe, 1998)

 

Chart 8: US Treasury Bonds vs. Rare Violins 1960-1996 (Source: Stradivari Invest, Fuchs-Taxe, 1998)

 

Chart 9: DAX vs. Rare Violins 1960-1996 (Source: Stradivari Invest, Fuchs-Taxe, 1998)

 

Chart 10 to 12: Other price developments for Amati, Guadagnini and Ruggieri violins. (Source: VIOLIN ADVISOR, LLC):

Chart 10

 

 

 

Chart 11

 

Chart 12

 

Chart 13

 

Chart 14

 

FAQs on investing in stringed instruments

In which price range are the greatest returns possible?

• According to our previous observations, this does not depend on the price range
• More important are: violin makers; Condition; Sound and (pre)owner
• We select the instruments precisely based on these and other aspects

How quickly can tied-up capital be realised?

• since the market is not very liquid, it always takes some time. It tends to take longer for more expensive instruments than for less expensive ones (from 4 months to about 1 year, in rare cases even longer)

What do I do with the instrument?

• our preferred model is lending to a musician. He takes care of the instrument and usually pays the insurance premium as well as the maintenance and checks. Some are also available for a house concert
• this model also has the advantage that there are no costs for "waking up" the instrument. An instrument that hasn't been used for a long time has to be woken up again after a while by playing it professionally.

Can I also buy or sell from other dealers?

• Yes, but especially when buying, you should pay attention to proven experts.
• In our model, the mediated musicians form an additional control authority.

 

How much does instrument insurance cost?

• 0.3% to <1% p.p. A. (of commercial value)
• Tendency: The higher the price, the lower the percentage

 

Which instruments have a high return?

• There are high-yield instruments in almost every era. It is important that as many criteria as possible are met. For example: violin maker, condition or sound. In the market, a distinction has been made between four different areas:

1. Contemporary Violins = current instruments
2. Modern Italian Instruments = approx. 1880 to 1975
3. Old Italian Instruments = 17th to 19th centuries
4. Old Cremonese = 17th/18th century

• "Good" meaningful certificates are important; Not everyone who certifies
• is accepted on the market

How do you differentiate high-yield instruments from others?

• This is only possible with the help of internationally recognized experts
• Clear certificates and documents that can also be clearly assigned to the instrument are important.
• All documents that provide information about the "way" of the instrument are helpful.

 

We are happy to help!

What factors affect the value and performance of an instrument.

Among other things, these are:

• violin maker
• condition
• sound
• previous owner

 

What is the minimum amount to invest in stringed instruments?

• String instruments that are worth investing in start at a price of around €20-25 thousand.
• of course you can also share an instrument with one or more others.

What are the yields on stringed instruments?

• the return can develop very differently but is stable and positive and so far only very rarely below 4%
• the average returns since 1906 are between 6% p.a. and 8% p.a.
• Younger instruments are increasing slightly faster than older ones. Provided that the criteria are confirmed.
• In recent years (since 2008, yields of 10-20% have occurred more and more often on certain instruments and bows)

 

Contact us. We are happy to help!

Ioan Gramatic and Heidi Gramatic

Reference:

• Violininvest: String instruments asset class
• Alternative Investments Part 1: String Instruments - Stefan Erlich, 2014
• Stradivari Invest
• VIOLIN ADVISOR, LLC
• FAZ article on violins as an investment (01/28/2007)
• Kristin Suess, Economic Study on Violin Prices, 1999, University of Cincinnati, USA
• Handelsblatt article from October 6th, 2014 on the subject of investments in violins and vintage cars
• Artes fine violins
• Stradivari society
• investrad

 

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