Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 85

Making money while orchestrating great music

Imagine sitting in a darkened concert hall listening to a young virtuoso take her violin through its paces. The brilliant beauty of the violin’s sound is carried right to the back of the room. Her violin is a Stradivarius and incredibly, you own it (or at least, part of it).

Three years ago, the Australian Chamber Orchestra launched the ACO Instrument Fund (the Fund). Thanks to the generosity of supporters like the Commonwealth Bank and Peter Weiss AO, the Orchestra already had access to rare and beautiful instruments. But there was a feeling within the ACO community that more could be done to secure fine instruments for its players.

Rather than turn to donors to subscribe to a new fund-raising campaign, the ACO began to explore options for the development of a fund structured as a unit trust backed by fine instruments. The ACO Instrument Fund is now recognised as an innovative impact investing opportunity which offers both a financial and a social return.

Existing investors range from hard-nosed financiers to committed philanthropists looking for opportunities to enhance the Australian cultural landscape. We are especially pleased to have created a financial product which increases the pool of opportunities for people interested in social impact investing.

Details of the Fund

The ACO Instrument Fund was launched in July 2011 as an unregistered Australian unit trust with its own Board of Directors chaired by veteran Macquarie Bank financier, Bill Best. JBWere Limited is the Fund’s Australian Financial Services Licence holder.

The Fund’s investment objective is to achieve long-term capital gains for investors through buying high-quality stringed instruments. These are loaned without charge to musicians from the Orchestra for use in concerts, recordings and rehearsals in Australia and on the ACO’s international tours.

The Fund is available to wholesale investors only and requires a minimum investment of $50,000. Unlike other unit trusts, there are no ongoing fees and commissions, and the ACO meets the cost of all general and administrative expenses.

The Fund offers limited withdrawal opportunities every three years. The ACO is required to hold a minimum of $250,000 or 10% of the value of the Fund in its reserves, whichever is higher, up to a maximum of $500,000 to pay for redemptions.

The Fund will be terminated in 2021 on its tenth anniversary unless 51% of unit holders vote to continue it (the ACO is not permitted to vote its units).

Assets of the Fund

The Fund’s first acquisition was a 1728/29 Stradivarius violin, believed to be Australia’s only Stradivarius violin, bought by the Fund in 2011 for $1.79 million and revalued this year at $2.95 million. Its latest acquisition is a 1714 Joseph Guarneri filius Andreae violin, bought by the Fund in early 2014 for $1.65 million and revalued just a few months later at $1.71 million. Both these violins were made nearly 300 years ago in Cremona, a small town in northern Italy, where the Guarneri and Stradivari families competed to build the finest instruments.

The increase in value of each of the violins is in line with research carried out by the ACO prior to setting up the Fund. During this time, the ACO reviewed sales data from reference resources such as Tarisio/Cozio and examined academic studies. It also consulted widely with respected dealers including Simon Morris from J & A Beare and Peter Biddulph, a distinguished London- based expert. The ACO’s research suggested annual returns of around 6-8% for public sales and 8-10% for private sales had been achieved in the past, with even higher returns achieved for violins from luthiers like Stradivarius and Guarneri del Gesu. As an asset class, fine instruments also typically show lower price volatility and display a low correlation with other financial assets (Graddy and Margolis, Fiddling with Value: Violins as an Investment?).

Financial and social returns

The ACO Instrument Fund was launched with a unit price of $1.00. In May 2014, the Board approved an increase to $1.20 following a revaluation of the underlying assets. The increase from $1.00 to $1.20 implies growth of almost 6.5% per annum for the Fund’s founding investors.

The Fund’s social return is equally significant. Satu Vänskä, Principal Violin and custodian of the Stradivarius says, “I will never forget the feeling when I was handed this instrument to play for the first time … a Stradivarius, the epitome of fine violins … it has a soul and personality of its own. For the violinist, this means that the violin seems to play the player.” Not only do individual musicians benefit from having access to fine instruments, the Fund acts as a powerful recruiting tool which allows the ACO to attract and retain world-class musicians.

Audiences, both in Australia and internationally, in turn benefit from the opportunity to hear music played to an exceptionally high standard. These audiences range from the ACO’s 10,000 subscribers to underprivileged children in the ACO’s educational outreach programmes, to audiences on concert hall stages in London, Vienna and New York.

Finally, there are the social benefits accruing to the investors themselves. These include making a direct contribution to the wellbeing of society, and the deep sense of connection that comes with owning the rare and beautiful instruments they hear on the stage.

 

Pennie Loane is Investor Relations Manager for the Australian Chamber Orchestra’s Instrument Fund. For more details, see www.aco.com.au. This article is for general education purposes only and is not personal financial advice nor an investment recommendation. As with any fund, asset values can rise or fall, and potential investors should read the relevant offer documents and seek professional advice.

 

banner

Most viewed in recent weeks

2024/25 super thresholds – key changes and implications

The ATO has released all the superannuation rates and thresholds that will apply from 1 July 2024. Here's what’s changing and what’s not, and some key considerations and opportunities in the lead up to 30 June and beyond.

Five months on from cancer diagnosis

Life has radically shifted with my brain cancer, and I don’t know if it will ever be the same again. After decades of writing and a dozen years with Firstlinks, I still want to contribute, but exactly how and when I do that is unclear.

Uncomfortable truths: The real cost of living in retirement

How useful are the retirement savings and spending targets put out by various groups such as ASFA? Not very, and it's reducing the ability of ordinary retirees to fully understand their retirement income options.

Is Australia ready for its population growth over the next decade?

Australia will have 3.7 million more people in a decade's time, though the growth won't be evenly distributed. Over 85s will see the fastest growth, while the number of younger people will barely rise. 

Why LICs may be close to bottoming

Investor disgust, consolidation, de-listings, price discounts, activist investors entering - it’s what typically happens at business cycle troughs, and it’s happening to LICs now. That may present a potential opportunity.

The public servants demanding $3m super tax exemption

The $3 million super tax will capture retired, and soon to retire, public servants and politicians who are members of defined benefit superannuation schemes. Lobbying efforts for exemptions to the tax are intensifying.

Latest Updates

Shares

Exploiting Warren Buffett

Growth investors are using Buffett to justify buying blue chip stocks at almost any price. It’s a recipe for potential disaster, as investors in market darlings like CBA and Cochlear may be about to find out.

Property

Population density trends and what they mean for housing

With Australia’s population moving through the fastest rate of growth since the 1950s, our cities and towns are naturally densifying. This is a look at the latest trends and how they will impact the property market.

SMSF strategies

The ultimate superannuation EOFY checklist 2024

We're nearing the end of the financial year and it's time for SMSFs and other super funds to make the most of the strategies available to them. Here's a 24-point checklist of the most important issues to address.

Shares

The outlook for Nvidia, from a long-time investor

Nvidia has taken the world by storm and is now the third largest stock on the planet - larger than Meta, Amazon, and Alphabet. Here is the latest take on Nvidia from a fund manager who first invested in the company in 2016.

Economy

Gross National Happiness?

Despite being richer, surveyed measures of happiness have been flat to falling in Australia. Some suggest we should focus less on GDP and more on broader measures of wellbeing, though there are pros and cons to that approach.

Shares

The power of dividends

In an era where growth companies dominate and the likes of Nvidia grab all of the attention, dividend paying stocks are flying under the radar. Some of these stocks offer compelling prospective returns.

Fixed interest

The best opportunities in fixed income right now

After more than a decade of pitiful yields, bonds are back offering better prospects for income investors. What are the best ways to take advantage of the market inefficiencies in Australian fixed income?

Sponsors

Alliances

© 2024 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.