Welcome to our unique information for fine wine investment
The market and recent
performance
Although investing in fine wine as a viable asset class seems a
relatively new phenomenon, savvy collectors and fine wine
enthusiasts have been doing so for many years. By buying more wine
than they intended to drink, the future sale of their excess cases –
once matured – would fund new purchases. Our aim is to help make the
Fine Wine Investment Market accessible to everyday investors, who
may not have the knowledge, understanding or time to do it
themselves.
Over the last 25 years, there is no doubt that fine wine has been a
sound investment, with prices for some of the top investment-grade
wines rising consistently at 10-20%+ per annum. Of course, there
have been quieter periods, outbalanced by periods of sharp growth,
but overall, the market has proved to be low risk, with little
volatility. Traditionally, the US and European have been the largest
buyers of Bordeaux Grand Cru classés, but in more recent times, the
Asian market has taken a very keen interest in the market. As a
result, investing in fine wine gives UK investors the opportunity to
tap into the world’s biggest growth economy – China. With Chinese
buyers showing insatiable demand for the top wines, and with only a
finite supply, the demand: supply imbalance that this market relies
upon has been exacerbated and this is reflected in the Liv-ex Claret
Chip Index’s 42% and 47% increases in 2009 and 2010 respectively.
Fine wine is the only asset class that operates on a perfectly
inverse supply curve, that is that whilst supply can only diminish
for any given vintage after production, demand is only set to
increase, as the consumption market demand for Bordeaux wines will
only reach its peak once the wines are into their drinking window
(typically 5-50+ years from production for Grand Cru classé wines).
It is this unique market mechanism that creates the consistent
growth curve for fine wine values and the reason why wine has little
correlation to other asset classes in terms of volatility.
For those who are tired of low interest rates, inconsistent stock
market performance and the recent hike in Capital Gains Tax to 28% -
fine wine investment offers a simple solution. Wine is a tangible
asset, a highly desirable luxury product that we aspire to have and
when this asset becomes more rare and expensive, its desirability
increases, thus it is a Veblen good. However, it is unique amongst
other investable Veblen assets, such as gold, as it has proven to be
recession proof and is free from Capital Gains Tax*.
* For detailed
information on the CGT implications of fine wine investment, please
read our Tax Considerations
page.
Why does fine wine go
up in value?
‘Investment-grade’ fine wine will mature over time and therefore
improve with age. In regions such as Bordeaux, finite quantities are
produced each year and once wines are released, the supply of the
wine becomes ever more scarce, whilst demand only rises, creating
the inverse supply curve that drives the prices of the top
investment wines up. Unlike many other luxury goods, the supply of
Bordeaux wines cannot be increased to stem the increasing demand for
both fine wines for consumption and fine wine investment due to
restrictions placed by the AOC.
Do I need to know a lot about fine wine?
You do not need to have much knowledge in the subject, as a
fine wine investment management service we will
take you from beginning to end as comfortably as possible. Whilst
some more experienced collectors choose to create and manage their
own portfolio, we strongly recommend seeking advice when investing
in fine 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 those wines that
meet strict investment-grade criteria, using expert advice and
in-house analysis to ensure portfolios are constantly performing.
What are the advantages of wine over other investments?
Finite Product - Investors are buying in a physical
asset with a finite production but a huge global demand base. Supply
of this already limited asset then declines at an ever-increasing
rate over the years as the wines are consumed.
Tangible Asset – Investors in fine wine hold a
physical asset, which is not subject to the same volatility as other
financial markets. If a fine wine does not meet financial
expectations, they can still be enjoyed.
Tax - Fine wine investment is exempt from duty and VAT
(when purchasing in bond stock) 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. Our Tax
Considerations page will also be useful in providing some
information on the tax implications for investments.
Performance – Wine has outperformed almost all other
investable assets in recent times. Even in times of macro-economic
downturn, wine tends to remain more robust than many other
investments, with little correlation to the volatility of other
asset classes.
What are the risks?
Fine Wine Investment – 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 do your due diligence before purchasing any
fine wines. The links below will be useful:
www.companieshouse.gov.uk
lists details of all registered firms in the UK, including start
date and address.
www.wine-searcher.com
all major merchants and investment firms, both in the UK and
worldwide, will list their available wines on Wine-Searcher.
Investment Term – Short-term gains have been possible
in recent times, though your investment should be viewed as a medium
to long-term one in order for a portfolio to achieve its maximum
potential. At least five years should be considered the norm – give
or take – dependant on the wines comprised within the portfolio.
Wine Selection / Lost Opportunity – Probably less than
1% of wine produced worldwide can be considered investment-grade and
offer healthy returns. It is important to get involved in the right
wines at the right time and this is why expert advice is invaluable.
The most common risk associated with fine wine is without doubt lost
opportunity, where investment in a particular position turns out not
to be as lucrative as another position at a similar capital level.
Expert guidance is the only way to ensure that lost opportunity risk
is minimized and capital appreciation is maximized.
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. Bordeaux wines make up around 90% of those that can be
considered ‘investment-grade’, with other old world vineyards making
up the remaining wines that are traditionally associated with fine
wine investment.
What is `En Primeur'?
En Primeur is the name given to wines that are available for sale
before they are bottled (it’s essentially the French term for
‘futures’). This is a common way for collectors to purchase, as it
allows the opportunity to get involved with the top wines at their
youngest age and price. Each year, Bordeaux EP wines will be tasted
in early Spring by critics and members of the trade and ratings are
awarded to the individual wines. Release of the wines then follows
in the months after the Spring tastings and typically offers clients
a valuable opportunity to get involved with sought after Bordeaux
wines at the earliest possible stage.
The
scrolling trades below are brought to you in association with the
London International Vintners Exchange
