Investing in antique instruments

If you’re looking for something less mundane than an ETF to add diversity to your portfolio, antique musical instruments can make a sound investment.

Dealers in the high-value instruments market say, passion and prestige aside, investors have never before so aggressively sought sonorous antiquities.

“I am taking calls on a slightly more regular basis, talking to people who have heard that antique instruments are a solid investment,” says Tim Ingles, director and head of Sotheby’s musical instruments department in London, U.K.

As with most niche investments, you should have an interest in music beyond its monetary value.

“Quite often I’m talking to people who learned violin as a child [and] ended up as businesspeople,” he says.

There’s been a fairly consistent growth in the value of vintage instruments over the past 50 years. For instance, Ingles worked on the sale of an 18th century Stradivarius called the Lady Blunt. It’s named after Lord Byron’s granddaughter Lady Anne Blunt, who owned it for 30 years.

The violin was sold again last year for a staggering $16 million. Sotheby’s had first sold it in 1971 for £84,000. “That’s between 12% and 13% per annum,” he says.

But old instruments are only reasonable investments if you have at least $500,000 in investable assets. To buy something with good investment potential, you’re looking at spending $50,000 at the bottom end.

From there, “the sky is the limit,” says Ingles. And that’s where the market gets a bit cloudy. He adds there are no published catalogue figures with which to value instruments in the private sale realm.

And in an opaque market, the owner of a Stradivari violin can charge what that market will bear. The range for a Stradivarius, for example, is anything from $1 million to $16 million. Supply and demand also dictate instrument value.

“If you plot a graph for the stock markets and for violin prices, the violin prices line is heading upwards very steadily,” says Ingles.

But only those who bought and held were richly rewarded.

“These things have generally been held for decades rather than years,” he says. “So if they come onto the market very quickly there tends to be a little bit of suspicion about why that would happen.”

And, unlike past decades, demand for these rare objects isn’t limited to Western countries.

“With the emergence of new markets in Russia and China, the demand is certainly going to be sky high over the next 10 or 20 years,” he says. “You’ve got what, to an investor, ought to look like a promising situation.”

HASSLE FACTOR

• Authenticity isn’t assured. There are a lot of fakes. Every purchase requires a thorough examination and a second opinion.

• Expensive insurance. You need specialized insurance, especially if you’re lending it to a working musician, with an annual cost of up to 0.5% of the instrument’s value.

• Regular maintenance. The owners need to let a restorer look at their instrument to see if it requires work. Most antique violins are extremely well-maintained by collectors and musicians, (60% to 70% of all Stradivarii made are still around 300 years later).

BUYING & SELLING TIPS

• Establish authenticity.
• When the violin was made and the condition of the instrument affect value.
• While sound quality doesn’t always make a difference to the intrinsic value of the instrument, poor quality will limit the pool of potential buyers.
• At the top end of the market, which comprises half a dozen of the best Italian violin makers, there are only 2,000 instruments, with a combined value of about $4 billion.