Trader sees profit in violinists playing beyond their means

Trader sees profit in violinists playing beyond their means

One of London's most successful violin restorers and traders, Florian Leonhard, is hoping to attract investors to his alternative investment syndicate as more conventional assets look increasingly vulnerable to an economic slowdown.

The Fine Violins Fund, which counts cellist Julian Lloyd Webber among its directors, has so far raised €16m (£12.5m) towards what it hopes will be a €60m syndicate investing in the most precious pre-19th-century violins, mainly from Italy.

Leonhard intends to invest in 50 violins valued at about $1.5m each - many of them beyond the means of the musicians who play them. The instruments will not be locked away in a bank vault; they are to be loaned out, without charge, to promising musicians, 30 of whom have already been identified.

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The syndicate claims to benefit not only because the instruments' quality is maintained by regular use, but also because violins that are linked to the early career of performers who grow in reputation can soar in value.

Former Lazards banker François Mann-Quirici, who is the fund's business development director, said: "Prices [for top-end violins] have steadily increased for 300 years. There is a scarcity value, with an average return of about 11% but with very low risk - the risk is, we say, half the level of the public equity market."

This average return does not include maintenance, insurance or dealing costs, but Mann-Quirici insists expert dealing and restoration, combined with the benefits of placing instruments with the right musicians, mean the Fine Violins Fund can with confidence target a 15% net rate of return. He concedes the market is highly illiquid, making it difficult to track. In his private dealings over the past eight years, Leonhard claims to have generated net returns of about 25%.

With waves of cash leaving many conventional investment asset classes, alternative funds - from wine to rare historic coins - have been courting likely backers, with mixed results. Notable disasters have included the collapse of two Spanish rare stamp funds two years ago amid allegations of fraud and a string of wine schemes that have attracted the attention of fraud investigators in Britain. A 1980s craze for investments in vintage cars proved misplaced as the market plummeted, never to recover. Few alternative investment schemes are regulated by the Financial Services Authority.

guardian.co.uk © Guardian Newspapers Limited 2008