The Estonian Foundation of Musical Instruments (Eesti Pillifond) and TRINITI Law Firm have partnered to offer innovative solutions for investing in rare stringed instruments in the private sector. In addition to individual investing, there are now opportunities for consortium investing, such as jointly acquiring rare stringed instruments with a group of friends, work colleagues, or a society. Investing in a fine instrument with significant musical value not only fosters the development of promising local talent but also presents a fixed-return investment opportunity.
Are you interested in the idea of investing in fine musical instruments? Here’s where to start:
Define your investment Goals: Begin by discussing and clarifying investment goals with fellow investors. Consider the level of familiarity and trust among investors and establish the investment horizon. Explore Investment Solutions: Familiarise yourself with the various options available for investing in a fine instrument consortium. Should you have further inquiries, the Foundation of Musical Instruments, and representatives from TRINITI Law Firm are eager to meet interested investors, provide detailed explanations of the options, and assist in creating tailored solutions. The initial consultation and solution development come free of charge for investors.
What opportunities are available for multiple parties to acquire rare stringed instruments together?
The Foundation’s contractual partner can either be a group of investors, or a company founded by them. The relations between the investors in the consortium and the consortium’s relations with the Foundation of Musical Instruments are both agreed upon.
In order for multiple interested parties to invest in the musical instrument together, there are various options:
1. Investors acquire the instrument jointly in their own name, either based on a contract of partnership or by creating a joint private limited company.
a) Contract of Partnership (Partnership Agreement): Involves a mutual agreement on each investor’s contributions, the partnership termination process, and, in particular, the distribution of the final financial result, as well as decision-making on whether to extend the instrument user contract concluded with the Foundation of Musical Instruments or not. The instrument becomes collective property, and the agreement outlines the representative of the partnership in the contract with the Foundation of Musical Instruments.
This option works well if the investors know each other and have mutual trust. It is important to record the agreements specifically – both the agreements within the partnership and the partnership’s contract with the Foundation of Musical Instruments.
b) Private Limited Company: Contributors provide a loan to a jointly established private limited company for the instrument’s acquisition. Participation in the company acquiring the master instrument corresponds to the size of the contribution. Shareholders’ relations and decision-making rights are governed by the private limited company’s articles of association (for example, the consent of all shareholders must be obtained to extend the user contract with the Foundation of Musical Instruments). If necessary, an additional shareholders’ agreement can be concluded.
2. Investors provide funding to the Foundation of Musical Instruments, which then acquires the musical instrument. Each investor’s contribution constitutes a loan to the Foundation of Musical Instruments with an agreed term. Upon loan repayment, the musical instrument is sold. The interest amount is not recorded in the contract, but it corresponds to the income received from the sale of the instrument. In this case, it is important to agree on how the contractual relationship will end. For example, it can be included in the contract that in any case the musical instrument will be sold after 30 years (or any other agreed period of time) (unless all investors want to extend the term) or that at least 2/3 of the investors must notify of their desire to terminate the contract and sell the instrument.
Regardless of the contractual form, the members of the consortium can conclude any additional mutual agreements in the contract and supplement the contract accordingly.
What are the tasks of the Foundation of Musical Instruments?
The Foundation of Musical Instruments serves as a fine instrument investment partner, offering a comprehensive framework for interested investors. Services include sourcing musical instruments within a suitable price range, obtaining instrument certifications, contract signing, arranging insurance, and connecting instrument owners with musicians who will play the instruments.
The Foundation of Musical Instruments ensures that the musical instruments are kept in proper conditions until they are rented out and that the instruments are maintained by qualified experts.
What are the responsibilities of the instrument user (musician)?
The Foundation of Musical Instruments signs three-year contracts with musicians who have won the competition for instrument use. The contract outlines obligations related to instrument use. The user must follow the Council of the Foundation of Musical Instruments’ guidelines for the use of musical instruments, which stipulate the terms and conditions of the instrument use, including maintenance, inspection, transport, and storage.
The Foundation of Musical Instruments undertakes, in accordance with the contracts concluded with the musician and the owner of the musical instrument, to provide insurance coverage for the instrument under conditions suitable for valuable musical instruments.
Where are the musical instruments insured?
The Estonian Foundation of Musical Instruments’ collection is insured by Aston Lark Europe Limited, a leading insurance company for valuable musical instruments. This same insurer also covers the Finnish Kulttuurirahasto collection.
How is the musical instrument evaluated?
The value of instruments is assessed by esteemed instrument makers in Europe, such as Vatelot-Rampal, Hieronymus Köstler, and others, who are the cooperation partners of the Foundation of Musical Instruments.
What factors affect the price of a stringed instrument?
Factors influencing the price of a stringed instrument include the maker, the instrument’s condition, the quality of example and the provenance.
How does an investor earn income?
The prerequisite for earning income is to invest in musical instruments. According to the contract with the Foundation of Musical Instruments, the investors give the acquired musical instruments to top musicians for a limited period of time. In order to maintain and increase the value of an instrument, it is important that it is played. At the end of the contract period between the investor or a group of investors and the Foundation of Musical Instruments, the investor has the opportunity to resell the musical instrument or continue to grow its income.
Unlike shares, bonds, and other financial instruments, the investment is less liquid, and the costs associated with the purchase are higher. According to experts, investments in musical instruments work best for a perspective of at least 5 to 10 years. So, the musical instrument is definitely not a get-rich-quick tool. However, it has a constantly increasing value. Thus, it is a good opportunity for long-term value-based investment, which helps to diversify the investment portfolio and spread risks.
A string instrument of high musical value is an essential prerequisite for breaking through in top international competition as a soloist, chamber musician, and member of the orchestra. Owners can constantly monitor the progress of their investment at concerts in Estonia and abroad, follow the development of the musician playing the instrument, and enjoy it.
How are the expected returns of the musical instruments calculated?
Return calculations are based on sales records from auction houses and musical instrument brokers. For example, the Tarisio auction house, which specialises in historical string instruments, operating in New York, London and Berlin, and J & A Beare in London have comprehensive records of the sale of rare instruments since the 18th century.
Jason Price, the founder and manager of the Tarisio auction house, pointed out the increase in the sale price of the Stradivari violin at his investment seminar held in Tallinn last year. While this master’s instrument fetched £84,500 at auction in 1971, 40 years later, in 2011, a Stradivari violin fetched £9.8 million.
The annual return on investment in stringed instruments depends on both the period considered and the instrument maker. Violins by masters such as Antonio Stradivari and Giuseppe Guarneri del Gesu are among the most valued.
At the invitation of the Foundation of Musical Instruments, Anders Bjørnsen, the head of the Art and Strings Collection of Sparebankstiftelsen Norway, has been in Estonia to talk about investing in musical instruments, and he offered an annual return of 3.7% to 6.9% for valuable master instruments and up to 12% for the aforementioned famous master instruments.
The seminars held in Tallinn by international experts – Jason Price and Anders Bjørnsen – can be viewed on Eesti Pillifond’s YouTube page.