As interest in exotics has grown,
however, specialized vehicles have
multiplied. Art funds have been created as closed-end models that raise
money. After the fund closes, the
money is used to buy art. Investors
receive their returns when the art is
sold in 10 years.
An open-end model is being used
by the Artist Rare Instrument Fund,
which invests in rare stringed instruments. Investors must commit funds
for five years. The fund’s managers will call in the money as needed
when a desired musical instrument
There are fewer than 600 rare
Stradivarius violins in existence, for
example. Fund partner Ed Papier
says investors are assured that they
will get their money back because of
SaleS for fine wineS grew
from 2009 to 2011
in the hong Kong/aSia marKet,
need to cash out in a hurry could
have trouble doing so. This is true
even when the non-liquid assets in
question are highly desired bottles
The best vintages in French wines
remain a hedge against inflation and
currency fluctuations. Sotheby’s
sales figures for fine wines in the
Hong Kong/Asia market grew 213%
between 2009 to 2011 during the
has more than one way of going to
their heads. Sleigh tells a story that
underscores this risk.
RARE COIN BE TS
Marc Henn, founder of Harvest
Financial Advisors of West Chester,
Ohio, a multifamily wealth manage-
Disillusionment with returns on traditional financial investments is
driving more clients toward niche alternatives.
the fixed scarcity.
The Stradivarius cello owned by
the late performer Bernard Greenhouse recently sold for more than
the previous record price of $6 million — although an exact sale price is
Average annual returns of exotic
investments may not necessarily
outstrip those more traditional asset
classes over the long term. Between
1900 and 2000, the S&P 500 rose
at an annualized 11%, according to
Healey; between 1980 and 2005, he
says returns on investments in fine
violins rose 10%.
LIQUID ASSE TS
Of course, exotics are by nature non-liquid assets, meaning clients who
global market rebound.
Yet risks remain for investors.
Auction houses like Sotheby’s don’t
give investment advice, says Robert
Sleigh, head of wine for Sotheby’s
Asia. “We only can advise how wine
has performed in the past,” he says.
ASSE T RISKS
Serious wine investors commonly
sell at least some bottles purchased
in advance on the futures market
once the wine is delivered, Sleigh
says. But pricing can fall short of
expectations. Wine investors are at
the mercy of weather and vine-eating pests, as well as changes in taste
among wine connoisseurs.
Besides these mundane risks, they
may also find that wine by its nature
ment firm, learned about rare coin
investing from his father.