Strings Attached

Return on Investment
Globe Investor Magazine, May 22, 2008
Photograph by Toby Melville/Reuters/Corbis

For all of the fame and fortune, the world of high-end violins is a closed affair. The Centre for Economic Policy Research concluded that violins have produced homey but stable returns-between 3.5% and 3.97% over the long term (adjusted for inflation). But the CEPR's numbers may actually be conservative: They're based on auction sales, but the most valuable violins are almost always bought and sold privately, so you have to be an insider to know what's going on. There's no question, however, that the instruments of two 18th-century Cremonese makers command the highest prices: Antonio Stradivari and Giuseppe (del Gesù) Guarneri. Florian Leonhard, a London-based violin dealer, insists "nearly every golden period [1700-1720] Strad in good condition would sell for up to $5.5 million" today. Leonhard is seeking investors prepared to pony up $600,000 for a boutique fund that will invest in top-end violins and cellos. He says the market for fine stringed instruments has yielded compound annual returns of 12.8% since 1950, and he is projecting annual returns of roughly 15%, after fees and expenses. Sound appealing? Before you head off to your friendly neighbourhood Strad dealer to start your own fund, here are a few caveats to the emptor (roll over the circles in the above picture to see caveats), culled from several experts. - Tamara Bernstein