Fine wines have always commanded a premium on restaurant menus, but have you ever stopped to consider the other side of the trade on a romantic dining experience?
Tempranillo Photo credit: Mick Stephenson
Fine Wine Investing
Today we begin a short series on investing in Fine Wine. Fine Wines as an investment opportunity may sound like something that well heeled folks with large estates and walk in wine cellars are equipped to dabble in. However, as with many things the rich do, they tend to do it because there is money in it.
The market for Fine Wines is remarkably stable and refreshingly uncorrelated with other asset classes, which is why the rich, apart from bragging rights, have no qualms about storing a portion of their nest egg in corked glass bottles.
Today, the stability and out sized price gains in the Fine Wine market are available to almost anyone willing to invest. The best part is, you don’t even need to build a wine cellar or worry about your retirement account spilling in an unfortunate accident or being accidentally enjoyed at a candlelight dinner at home. You can now invest in Fine Wines as you would any other asset class, via the internet.
You still own the wine, naturally, you just don’t need to deal with the hassle of transport and storage. All you need is a minimum investment of 5,000 British pounds and a bit of information.
If you would like more information on this investment opportunity, which is available through one of our partners, simply email us at: email@example.com with the word “WINE” in the subject line or simply complete the form below:
For the moment, we present the following information as a brief overview of the market of Fine Wines. While it should go without saying, we present the following information as a general overview and cannot and will not comment upon whether or not Fine Wines are appropriate for each individual’s investment situation, this is a decision that must be made by the individual. However, if you or someone you know determines that Fine Wine investing is agreeable to their taste, we will gladly facilitate the transaction.
WINE MARKET ORIGINS
From its origins as an exotic drink, wine has become a long standing commodity, with a lineage that dates back to the Greek empire and beginning of trade in 1600 BC. The ancient Greeks carried wine throughout the Mediterranean coast, with Europe leading the way in consumption, production and movement. A major transformation occurred when Napoleon III requested a classification of best Bordeaux wines in France in the year 1855. Following this, wines were classified on a recognised price-based ranking, leading to the grading of the world’s finest wines.
PRESENT DAY INVESTMENT AND MARKET PERFORMANCE
The traditional notion that wine investment is about buying two cases of young wine so that, after a period of maturation, you drink one case and sell the other to finance both may have a certain romantic appeal.
As an investment philosophy, though, it is heavily discounted by today’s serious investor. Investment is all about risk and good investment choices are made when the exposure to risk is clearly understood.
Fine wines has been one of the strongest areas for investment in recent years What may surprise many is that an investment in fine wine has consistently been a low risk investment opportunity compared to oil, the FTSE 100 and even gold. Combined with strong absolute performance and low correlation to other assets, that has led wine to find a home in many serious investment portfolios.
Those interested in accessing the fine wine market have more options available to them than ever before with a range of tax-efficient structures available. The timing looks opportune too: prices came off significantly in 2011, leaving the possibility of a substantial upturn in the medium term, and inflationary fears are enhancing the attractiveness of physical assets.
There is very little correlation between financial markets and fine wine prices. For example, whilst many stocks, shares and markets crashed during the financial crisis of 2008, most wines continued to significantly appreciate in value. Whilst wine prices are not always free of volatility, the market tends to be far more resilient than many traditional investments that investors go for. The reasoning behind this is actually very simple. Fine wine is a completely tangible asset, a luxury product in which supply is always exceeded by demand. As a particular vintage wine is consumed, more of that wine cannot be produced, so the wine appreciates in value.
Fine wines frequently outperform share indices, for example between May 2010 and May 2011, whilst the FTSE 100 appreciated by 15.6%, the fine wine index increased by a considerably higher 21.1%. The Live-Ex 100 Fine Wine Index is the industry’s main performance benchmark, and represents the price movement of the 100 most sought-after fine wines. The price index is calculated on a monthly basis, with the vast majority being Bordeaux wines. Over the last 25 years the very best wines have appreciated by 15-25% per annum, a staggering return on investment very difficult to find anywhere else without very high risks.
THE FINE WINE MARKET AND SUPPLY AND DEMAND
It is the underlying supply and demand characteristics of wine which make it attractive as an investment proposition. On the supply side, Bordeaux (considered by many to produce the only investment grade wine) is a finite geographical area in France with an essentially fixed number of wine producers (châteaux). The initial supply of wine is therefore finite, and over time can only fall as bottles of the wine are consumed.
Meanwhile demand tends to rise, for two reasons. First, the quality of the wine improves over time as it matures, making it more attractive to drink. Second, global demand continues to rise as new markets for the wine open up. In the last 25 years alone we have seen Japan, Russia, Korea and China ‘discover’ fine wine and consume it in large quantities, with countries such as India and South America yet to come ‘on stream.’
Intrigued? More to come on this interesting and exciting opportunity.