Alternative alternatives (collectibles, for example) have become popular with investors hoping to avoid any volatility (or stagnation) in traditional parts of the markets (stocks, bonds, etc).
While there are millions of shares of Apple and thousands of works by Picasso, there are only around 150 Stromberg guitars significant value, 250 Gibsons signed by Lloyd Loar, and 91 Martin D-45s. There are 300 million people in the U.S., and there aren’t enough good vintage instruments for everyone to own even one.
The value of vintage guitars have significantly outperformed major stock markets such as the Dow Jones, FTSE 100 and S&P 500 over the past 20 years.
In the 90’s one it was rumored one of the big investment firms in NYC (Goldman Sachs, Morgan Stanley, JP Morgan, etc.) had a guitar investment fund that helped to drive prices of vintage Les Pauls and other guitars into the stratosphere. Many of those guitars had lost close to half their value during the economic downturn in the early 2000’s.
Similarly the worldwide banking crisis in 2008 slowed the growth rate of guitar prices observed between 2002 and 2008. You can see this clearly in the VGP50 index – our simulated guitar index fund tracking 50 of the rarest and most sought-after guitars.
Given such a turbulent market for vintage guitars over the lass two decades the appetite from investors has been relatively week beyond private collections.
As we enter a new wave of economic uncertainty many would be right to be slightly pessimistic about the potential of a guitar fund over the coming years. That said, many in the market are also diversifying into alternative alternatives.
Currently Anchorage Capital Investment Management operates one of the most widely known guitar investment funds.
Learning the lessons of previous mistakes the Anchorage fund is much more conservative. It does not invest in the blue chips of top tier vintage guitars such as late 1950’s Gibson Les Pauls and pre-war Martin D-45s that you might expect.
The Anchorage fund will also buy guitars with memorabilia status attached. As we explored in our earlier post, The Top 10 Most Expensive Guitars Sold At Auction, a celebrity owner can significantly boost a guitars market value. Similarly Anchorage will also lend guitars in it’s collection to artist to further increase their desirability.
Shares in Anchorage’s fund can be bought in amounts beginning at US$10 million each, well beyond the reach of private investors.
Big investment funds are unlikely to create new guitar funds (instead will buy into funds like Anchorage), but I expect to see many more private investment firms to start offering more alternative alternatives based funds and I’m certain at least some of these funds portfolios will comprise of vintage guitars.
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