Thinking of investing in wine, fine art or rare stringed instruments?
If so, and if you were in Manhattan on Tuesday night, The New York Hedge Fund Roundtable seminar on “Alternative Alternative Investments” at the Princeton Club was the place to be.
Indeed, despite the muggy weather in the middle of the “dog days” of summer, the seminar attracted a capacity crowd of curious financial professionals, underscoring the surging interest in alternatives in this anti-equity era, no matter how obscure, illiquid or opaque the asset class may be.
And make no mistake: no one confused the market for wine, art or stringed instruments for the New York Stock Exchange. Even the panelists at the seminar, all top executives of funds investing in those asset classes, conceded that their specialized markets were fraught with risk and not for everyone.
The art market, the audience learned, is the world’s oldest unregulated – make that very unregulated - market. Most of the $10 billion in annual sales are private, sales of fake paintings are not uncommon, and while the market is global and broad it is also small, secretive and “runs on gossip,” according to Morgan Long, director of art investments for The Fine Art Fund Group.
The market for investment grade wine is highly inefficient and “not yet developed,” said Timothy Clew, co-managing partner for TWT Investment Partners. What’s more, the market remains small, under-capitalized, burdened by complex regulations and lacking in real time market data, Clew added.
Without a doubt, the market for rare stringed instruments, such as centuries old Stradivarius violins, is tiny, highly illiquid, highly specialized and – in what had to be the understatement of the evening - “not known by everyone,” as Anthony Finley, partner in the Artist Rare Instrument Fund, put it. As for transparency, there are “not many public transactions” when it comes to sales, Finley said.
Turning risks into rewards
But those same risks also are successfully exploited for substantial gain, the executives pointed out.