Antique violins a sound investment

Antique musical instruments can play a role in a wealthy investor’s portfolio.

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

“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. “People are being forced to be a bit more broad-minded about their investment portfolios these days.”

Sotheby’s core business is art, which has for many years been considered a standard part of a broad investment portfolio.

What investors in antique violins and other top-end musical instruments tend to share is a love of music.

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

Alternatively, they may be doing it for philanthropic reasons, in which case they’ve probably set up a foundation with an eye toward making the instruments accessible to musicians who otherwise could never afford to play them, he adds. Either way, there’s been a fairly consistent growth in the value of vintage instruments over the past 50 years; and that’s a chord that strikes with investors.

For instance, Ingles was instrumental in 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 ($200,000 US at the time).

Not a bad return for an old piece of wood. “That’s between 12% and 13% per annum,” he says.

Facts and figures

• $15.9 million (U.S.): The world record price for a musical instrument sold at auction, set by the Lady Blunt violin by A. Stradivari in 2011. Made in 1721, the violin was sold at Sotheby’s in London.
• $905,000 (U.S.): The world record for a Guarneri violin sold at auction, set by the Guarneri Baron Heath violin in 1988. Made in 1743 in Cremona, the violin was sold at Sotheby’s.
• Major antique instrument markets include Continental Europe, the U.K., U.S., Taiwan, Japan, Korea, and Hong Kong.
• $26 million – $36 million: the range of total worth of antique instruments sold at the world’s six major auction houses in 2011
• $100 million: the size of the global market per annum for antique high value violins
• 50: the number of Stradivari cellos in existence

These are only reasonable investments for those who have at least $500,000 in investable assets. To buy an instrument that has good investment potential, you’re looking at spending $50,000 at the bottom end. Then your question is what percentage of your net worth you should be spending on one particular type of investment.

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.

“You’re dealing with a market where, despite what you occasionally read in the newspapers about someone having invented a brand-new violin that sounds as good as a Strad, you actually struggle to find any musicians who would back up that idea,” he notes.

Most players agree an 18th century Italian violin will offer broader tonal colours than a newer violin. Centuries of playing time is said to open up the wood and improve resonance. Whether true or not, musicians worldwide buy deeply into the notion.

Prices, meanwhile, remain rather immune to market turbulence.

“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. As with most antique musical instruments, especially violins, there are a lot of fakes out there. Every purchase requires a thorough examination and a second opinion.
• Expensive insurance. You need specialized, tailormade 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 have a 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). Luckily, these instruments seldom need major restoration.

Buying & selling tips

• First, establish authenticity.
• When the violin was made and the condition of the instrument affect value.
• While sound quality doesn’t 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.

Courtesy: Sotheby’s U.K.