President's Blog

Alternative Alternative Investments

September 27, 2012
post contributed by Megan Flynn

Very unique and very alternative investments were presented to members and discussed at the August roundtable meeting. Stephen McCarthy from SVP - KCG Capital Advisors moderated a panel of experts in the topics of investment grade wine, rare stringed instruments, and fine art.

Morgan Long, the Director of Art Investments at the Fine Art Fund Group in London began with an overview of the market which is approximately worth $75 billion dollars and arguably the largest unregulated market in the world. The art market has doubled in size in the last 25 years and the Chinese Art and Antiques sector is the strongest growing market worldwide, she said. Some defining characteristics of the Art Market is the low liquidity, high barriers to entry, and the increasing demand contrasting directly with decreasing supply. “People think it’s a very risky place to invest and I would agree”, Long said.

There aren’t many investments where you can track the buys and sells back 300 years, Anthony Finley, one of the three partners of Artist Rare Instrument Fund, said. He estimated that there are approximately 4-5 billion worth of investments the stringed instrument market, some of which go for 60-20 million dollars each. The fund itself typically sees a nominal investment between 1-10 million per investor with a 5 year lockup to keep the fund as stable as possible, he said. Many of the instruments are out on the road being played by famous musicians that could also increase their price depending on the artist, This means the fee’s aren’t high as we’re we don’t have to pay to store them, Finley stated. To enter the market, he does admit you need an expert, and there are very few.

Timothy Clew,Co-Managing Partner of TWT Investment Partners LP, began by introducing what investment grade wine is by definition. As with art, Clew said that most of the growth in the past five years has also come from China. Prices are driven by global GDP growth and the number of new millionaires in the world - this is a wealth effect he said. There are many inefficiencies in the wine market that should be taken advantage of, Clew explained.  For example the average Bordeaux on the shelf has touched 5 hands, there is no need for that – it should only be two. There are also information barriers within the market, like lack of real time data and not having a main pricing source. Because of this, prices range hugely between markets.

It seemed like members would have loved for the presentations to go for another hour, but McCarthy, who did a great job moderating had to stop the presenters for the closing Q&A session. The audience was filled with genuine curiosity that you could hear in their questions. The event was engaging and left members contemplating the endless possibilities of their investments and was a great close to summer.

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