Monday, 27 February 2017
Last updated 21 min ago
Jan 17 2017 | 4:43pm ET
Editor’s note: By definition, alternative investments include assets far beyond your typical equity and debt securities, and fund managers are increasingly interested in the attractive - and largely uncorrelated - investment characteristics of such things as artwork, classic cars, and as Emily Lane of Elan Fine Instruments explains in this in-depth article, rare instruments such as violins.
Investing in Rare Violins
By Emily Lane, President & Curator, Elan Fine Instruments
Often seen as a passion project, or part of a philanthropic venture, rare & fine stringed instruments offer an exciting option to diversify one’s investment portfolio while providing an opportunity for an exceptional long-term investment. Though historically rare violins have not been widely recognized as assets for investment, this category is gaining interest due to the steady increase in value, a lively international market and finite supply.
A Stable Market
With greater than 150 years of valuation, studies have demonstrated that fine classical Italian instruments offer a steady increase of approximately 3-5% per annum with a dramatic percentage increase over the last couple decades. Over the past 20 years, many instruments in the top tier have climbed in value 12-25% with little downside or volatility, performing among the top asset classes exclusive of private equity. Even instruments not in the top-tier offer a steady increase in value, appreciating approximately 5 ½ % annually as cited by Donald M. Cohen, publisher of “The Red Book – Auction Price Guide of Authentic Stringed Instruments and Bows,” whose latest publication covers 15 years of collected auction sales results in the violin trade from 1997 to 2012. Donald also notes that the total dollar volume of auction sales has increased by more than 10% per year since 2006 further demonstrating an active and healthy market.
Tiers within the Market
As with any market there are numerous products available, depending on how much capital is available to invest. Even if one does not know about violins, the majority of people have heard the name Antonio Stradivari, who is universally celebrated as one of, if not “the” finest violin maker throughout history. An innovator in his time, with exquisite craftsmanship and artistry, Stradivari had a prolific career and his instruments noted for their tone and quality of materials continue to inspire violin makers today. Stradivari is not alone in this premier class of making some of finest violins from the golden age of violin making in Italy during the 17th-18th century. Guarneri del Gesu, Giovani Battista Guadagnini, Nicolo Amati, Domenico Montagnana and recently Bergonzi are among the makers that fine examples today can range in price from $1,000,000 - $15,000,000 and have proven significant financial returns for investors.
There is a finite supply and limited access to these rare examples of the violin family, with approximately 600 Stradivari instruments and 140 by Guarneri del Gesu violins known to have survived today. A diminishing supply due to the ravages of war, natural disasters and accidents throughout time has inspired institutions to collect and preserve the rarest examples. As the accessibility lessens and the values of the instruments continue to climb, opportunity increases for instruments in the 2nd and 3rd tier.
Not everyone has upward of $1,000,000+ to invest, which does not have to be a limitation for making a smart investment in the violin industry. As one category of instrument experiences a price increase, the effect trickles down to the other categories, increasing their value and elevating them to a new level of desirability. The market looks to instrument makers that have had steady output, with consistency in quality and sound to help determine the next makers to rise, filling in the recent gap created from a valuation shift. A maker who has seen a recent surge in value is French violin and bow maker Jean Baptiste Vuillaume. Not only was he a prolific maker, recognized for his outstanding output of quality instruments and innovations, but also he is accredited to training numerous violin and bow makers that are among the top makers to date. When the fine Italians reached new territory in value, Vuillaume prices went from a steady 80k-100k to an easy $300,000+, and a record of $1,361,015 in 2016 at auction for a matched string quartet.
There are makers old and new, in a wide variety of price points from different origins that can offer a sound opportunity. In talking with violin expert and scholar Philip J. Kass, he expressed that there are many possibilities in any school of violin making that could offer the quality one would look for in investing. In the English School, Philip mentioned John Frederick Lott II as having a “distinctive style that matches today’s aesthetic.” In the 1990’s his instruments were commonly priced around $20,000. Today it is not uncommon to find his instruments priced around $150,000 with a recent auction record this year for a violin at $108,000.
“Look to prominent makers of their age,” such as makers like “Giovanni Francesco Pressenda and Giuseppe Antonio Rocca in Italy. In France, consider Lupot, Pique, Gand and Bernardel, in Germany & Austria consider Stainer, Geisenhoff and Michael Dotsch, and while in Hungary look to Nemessanyi,” guided Philip. All of these makers among many others were highly respected in their time and remains so to this day.
As mentioned earlier, the golden age of violin making is commonly considered 17th-18th century and even more distinctly, the geography to have taken place in Italy. Today conversely, many industry experts acknowledge that the violin making industry is experiencing a new renaissance. As makers once inspired and learned from one another, the same is happening today within the violin making community. The quality of craftsmanship is flourishing and many contemporary makers are now among the distinguished class whose instruments are considered a valuable investment.
A good example of contemporary instruments increasing in value comes from Paul Becker, a violin maker & dealer in Chicago, Illinois who has followed the footsteps of multiple generations of violin making in his family. The Becker instruments are prized for their rich tone, excellent wood selection and exemplary workmanship, a bar of excellence that was established by Paul’s grandfather, Carl Becker Sr., a celebrated American violin maker. Since 1970 Becker instruments have gone up in value 5-12% annually and continue to be sought after by musicians and collectors.
As with most collectible investments, factors such as condition are a significant consideration in valuation. That being said, it does not mean that an item that has had restoration or is need of restoration doesn’t offer investment value or sales appeal. Often an item that has had some wear from use identifies it as an item that works well for working musicians. The depreciation an item takes in relationship to other items of a more pristine quality can provide a good option to acquire a quality piece at a reduced price. Even though the item isn’t expected to financially perform at the top of its class in sales, if well maintained or restored will increase in value within the industry standard.