FINE WINE INVESTMENT

Why does fine wine go up in value?

Fine wine matures once bottled and improves with age. A limited amount is produced every year (up to 20,000 due to French law) so when bottles are bought, the supply of the wine becomes rarer and therefore the price increases. While supply disappears, demand for mature wines can make early purchases an especially good investment. Demand and interest in fine wine investment is growing around the world and supply of the top wines cannot be increased. Fine wine investment is considered one of the best tangible assets.


Do I need to know a lot about fine wine?

You do not need to have much knowledge in the subject, as an fine wine investment service we will take you from beginning to end as comfortably as possible! We strongly recommend seeking advice when investing in wine as not all well-known wines are suitable for investment and so it is possible for potential investors to put funds into the wrong type of wines. Cult Wines deals only with the top 50 investment wines and has advice from financial experts and a ‘Master of Wine’ of which there are only hundreds of in the world.


What are the advantages of wine over other investments?

Finite Product: You are investing in a tangible, improving asset that has a limited production but a huge global demand base. The supply of this already limited asset then declines over the years as the wines are consumed.

Tangible Asset: Shares that fall in value are good for nothing save for selling at a loss. Wines that do not perform financially as well as expected can be enjoyed.

Tax: Your fine wine investment is exempt from duty and VAT and, in theory; profits are exempt from Capital Gains Tax. Please note that we advise you to consult a financial institution or an IFA for clarification.

Performance: Wine has performed very favorably amongst the strongest investments over the past few years. Even in times of macro-economic downturn, wine tends to remain more robust than many other investments.


What are the risks?

Fine wine investments - It is an investment market like any other, so be aware that prices can go down as well as up.

Unregulated Market - Only buy from established merchants and ensure you get the expertise needed.

Investment Term - Short term gains have been possible over the past two years though your investment should be viewed as a mid to long-term one. At least five years should be considered the norm, eight to ten years being better.

Wine Types - Only specific wines will tend to accrue value, and these wines tend to be expensive. Make sure that you are buying the right wines at the correct prices.


What sort of wines should I invest in?

Always speak to an advisor, as they can give you information as to which wines are performing best on the market at that particular time. As a rule of thumb, only ever invest in the top wines of Bordeaux and allow advice from your broker for diversifation once you have a solid foundation. You can then look at other areas for specialist fine wine investments. Whilst other parts of the world make good wines, the global secondary market has a smaller demand for these, so it is best to keep your portfolio made up of Bordeaux.


`En Primeur'. What is this?

En Primeur is the name given to buying wines before they are bottled (i.e. a future). This is the most common way for our clients to invest, and once the initial tasting (wine test – points scored out of 100) have been given, the risk is considerably lower and the price is still low. This leaves room for short and long term growth. These wines will be tested in April of most years, meaning the score can change and the wine price can spike. We will advice and manage your portfolio so we keep ahead of the news.

Below you can see an example of En Primeur that was released this year in April called Lafite Rothschild. As you can see from the graph, once the wine was scored out of 100, the price shot up dramatically and has increased by over 100% in 6 months alone. This graph is taken from the Liv-ex, which is the wine market version of the FTSE 100.
 

`Example of performances within the market’

These wines below show the top 5 performances of existing vintages. These wines are called back vintages. These examples are taken from the Liv-ex, which is the wine markets version of the FTSE.



 

Lafite Rothschild 2009
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Lafite Rothschild 2008
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Mouton Rothschild 2008
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