String Theory: Investing in High-End Violins

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Stradivarius violin

Facing volatile equity markets, investors often look to gold and silver. But an updated study of classical-instrument valuations by Brandeis economist Kathryn Graddy shows that violins may be among the most stable of investments. Graddy's data indicate that between 1850 and April of this year, the value of professional-quality instruments rose in real terms (i.e., after inflation) about 3% annually. High-end violins have appreciated at much higher rates — particularly rare instruments made by Italian masters like Stradivari, Amati and Guarneri del Gesù.

In turbulent times, instrument valuations have very little correlation with indexes like the S&P 500. That's valuable for anyone looking to hedge against the rampant swings of the stock market. In a recent study in the international journal Pensions, R.A.J. Campbell suggests that pension funds consider adding top instruments to their portfolios to diversify their risk. "Violins are much less volatile than art," says Graddy, who co-authored a paper called "Fiddling with Value: Violins as an Investment?" While the Mei-Moses Fine Art Index was down 35% in the first quarter of 2009, prices for top instruments showed no such tumble. (Read "How to Know When the Economy Is Turning Up.")

The melody isn't quite so sweet, however, once you get below the very top end of the market. Sales of midlevel violins — those valued under $100,000 — have weakened like nearly everything else in the recession.

"The instruments that sell for more than $1 million are a small percentage of the overall market," says Philip Margolis, a string-instrument analyst based in Rapperswil, Switzerland. "These are the ones you hear about, but there are maybe 500 in the world. But musicians use tens of thousands of instruments in the $30,000 to $500,000 range," says Margolis, who founded, which has information on more than 11,000 instruments worldwide. A small fraction of top instruments surface on the market in a given year, adding a rarity premium to their values. (Read "Accidental Genius: Why a Stradivarius Sounds So Good.")

The market for instruments worth less than $100,000 has indeed weakened somewhat, agrees Gael Francais, a violin maker and dealer based in New York City whose family has been in the violin-making business since the 18th century. Francais and Margolis say the recession has limited the capital available to musicians shopping for tools of their trade. (Watch Jeremy Caplan's duet with Yo-Yo Ma.)

Demand for student string instruments, including those valued under $10,000, has also suffered. "Like just about everyone in retail, our members have certainly been impacted by the recession," says Joe Lamond, CEO of the International Music Products Association, which represents instrument retailers. "Acoustic pianos and high-end guitars are discretionary purchases for most people, and in tough times these can be deferred until things look brighter." In such an environment, dealers are far more likely to offer discounts. (See 25 people to blame for the financial crisis.)

For the quarter ended March 31, retail sales of grand pianos were down 18.6%, according to the Music Trades magazine, and school-music product sales fell 6.5%. Nonstring instruments, from trombones and tubas to flutes and pianos, tend not to attract investment dollars because they diminish in value with wear and tear and age. Well-maintained string instruments are distinct — like wine — in that they appreciate with age as wood mellows and tonal qualities mature.

At the market's high end, new funds have launched to capitalize on the opportunity to diversify into fine instruments. Florian Leonhard, a London-based violin expert and dealer, is gathering more than $50 million for the Fine Violins Fund, aiming to buy as many as 50 old Italian instruments. Leonhard isn't alone in his confidence in the market. Emigrant Bank Fine Art Finance lends large sums of money using violins and cellos as collateral. And former concert violinist Staffan Borseman has established Stradivari Invest to advise big investors on the purchase of top instruments.

"People who have lost a lot of money in the stock market are scrambling to instruments as safe havens," says Francais. For anyone who owns a Strad, that market stability sounds like sweet music.

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