In 2011 Antonio Stradivari’s master violin – Lady Blunt – was auctioned off for €11.6m; the highest price ever paid for a musical instrument in an auction. While a high quality historical instrument is an invaluable tool in the hands of a musician and may also be a precious collector’s item, it can be an attractive investment as well. Stringed instruments are tangible assets and mobile goods, and the appreciation from musicians, collectors and investors is growing continuously.
While the violins, violas and cellos of Stradivari were appreciated in his lifetime, with the likes of the Medici family and the Spanish king ordering them, today, the estimated market size for Stradivari instruments is £2bn while the market size for high-quality stringed instruments is approximately £3bn.
Stable value generators
What makes musical instruments, especially stringed instruments, attractive assets?
Generally, with high quality stringed instruments, the increase in value develops steadily over the centuries. According to the Albert Fuchs Taxe, an independent standard publication covering the price development of this market, stringed instruments have recorded an average increase in value of between 5 and 8 per cent over the past 100 years; individual pieces range significantly higher.
One big advantage is that the performance of stringed instruments is almost entirely disconnected to other asset classes such as stocks, fixed income, gold, or real estate. Not a bad argument in a situation where interest rates for cash or bank deposits are near zero and government bonds offered by first-class debtors hardly yield profits at all. In addition, the instrument market is largely dominated by long-term investors, which is likely the main reason why top instruments are such stable value generators.
Investment and patronage
Many investors are seeking more than just a financial return. Certainly, a client who has bought a high quality stringed instrument can store it away properly and safely. But they also have the option to lend this instrument to talented young or established musicians. There is only a small step between being an investor and becoming a patron with companies such as Violin Assets acting as an intermediary between investors and musicians. We are observing that more and more private investors as well as foundations are fascinated by this investment proposition.
What are the risks?
As it is almost impossible for ordinary people to assess the value of an instrument, the following question arises: If an investor purchases a Stradivari for several million euros, how sure can they be that they have not bought a fake? Complete certainty does not exist as none of us witnessed how these instruments were produced.
However, modern investigation methods can facilitate the verification of an instrument’s identity. These include stylistic analyses and certificates from recognised experts; dendrochronological analyses that verify the condition and age of the wood and documents that make it possible to trace the history of prominent instruments over centuries. From an investor’s point of view, high quality stringed instruments meet three basic requirements: yield, security, and liquidity. Prices for modern instruments begin at about €30,000 while historical instruments make worth- while investments starting at about €100,000.
Christian Reister is co-founder of Violin Assets