On these pages you will find everything you need to know about investing in wine: the top ten investment brands, top ten traded wines, the best Bordeaux vintages to invest in, the best Lafite vintages, other investment wines, which merchants to contact and much more...
For wine investors, the last eighteen months have seen a strong and sustained market recovery from the last quarter of 2008 when the Liv-ex 100 Index dropped by 25% – its largest ever fall since its inception in 2001. Some wines, particularly the 2005s plummeted even further in the financial turmoil which took place after the collapse of Lehman Bros.
Now though, at the time of writing (July 2010), the market has bounced back with a vengeance and is moving full steam ahead, particularly since the beginning of this year.
The recovery began tentatively at the beginning of 2009 with small but incremental growth as the market bottomed out and canny, cash rich investors went back into the market to pick up blue chip wines at very advantageous prices. But given the uncertainty of the wider economy, the recovery still took several months to really gain traction and momentum, beginning in earnest towards the end of 2009.
Moreover, much of the gains by the Liv-ex 100 Index last year were largely underpinned by Chateau Lafite which completed an astonishing year of asset price growth. According to Liv-ex’s Claret Chip Index, it ended the year up a staggering 40%.
More recently though, the rest of the First Growths have followed Lafite’s lead and the market has moved ahead in leaps and bounds since the start of the year. Since January, the Index is up a quarter and is up over 40% on this time last year. In May, it moved up 4.4% sailing past its previous market peak back in June 2008 and now stands at a shade under 305.
So why has the market performed so well compared to equities’ much patchier record? One answer is the massive and growing Asian market which has played a pivotal role in providing strong demand for the world’s finest wines over the last few years, particularly Chateau Lafite.
One leading fine wine fund manager reported that ‘demand from China has more than substituted fro demand from Europe and the US which temporarily receded at the end of 2008.
Thanks to the abolition of all taxes on wine in 2008 by the Hong Kong government, there has been a mass exodus of wine to the former UK colony which has become a conduit for fine wine in the region. Thanks to its powerhouse economies, particularly China, and its growing number of billionaires with a thirst for the world’s finest and rarest wines, demand here seems set to continue and increase for the foreseeable future.
Fuelling this astonishing growth in sales are several UK merchants who have set up shop in Hong Kong in order to service the region. Almost all have recorded burgeoning sales, including Bordeaux Index where half its sales have gone through its Hong Kong office.
Last year, Sotheby’s reported that nearly 60% of all wine sold by value in its New York, London and Hong Kong salerooms ultimately found its way to Asian buyers. Moreover, Hong Kong has also seen some astonishing auction totals. In May, the New York merchants/auctioneers Acker Merrall & Condit hammered down the contents of the US collector Eric Greenburg’s cellar for $19.5m making it the largest sale ever held in Asia and the second largest total of all time. Now many believe that Hong Kong has overtaken New York as the epicentre of the auction business.
So, to a large extent, Asia effectively underwrote the fine wine market for much of 2009. But since the beginning of 2010, the recovery has been more widespread as the traditional markets of Europe and the US have also come back into play. As global demand has hotted up, so too have prices.
There have been other factors which have contributed to the recent spurt in prices. One is a shortage of stock, especially in Europe. Another has been the weakness of the pound against the dollar for most of the last eighteen months. So, given that most Asian currencies are pegged to the dollar, buying wine in the UK has been extremely attractive to Far Eastern collectors and investors.
Most recently, in June, the Chinese decided to end the two year peg of the remnimbi to the US dollar, which has led to a strengthening of its currency. For Chinese wine buyers, this makes buying wine in the UK even more attractive.
In addition, many of the newer buyers are buying to drink rather than purely invest, which is also having profound impact on supply, demand and ultimately pricing. ‘What is happening in Asia is almost all about consumption,’ says Will Beck, a fund manager with Wine Asset Managers. So the compound annual effect may well be far reaching and gives credence to the view that new markets are changing the demand profile of the industry for good.’
Allied to this is the re-emergence of several wine funds. After a difficult period in 2008-2009 when they were dealing with severe outflows caused by major redemptions, the funds have now clearly turned a corner and are firmly back in the market buying wine on behalf of their investors. This too has added yet more pressure on prices.
‘We are seeing a lot of demand from both private and corporate investors,’ says Willaim Grey of the Wine Investment Fund. ‘It’s certainly much greater than this time last year with a lot of interest coming from UK investors large and small who are looking for ‘real assets’ to spread risk. But what is most encouraging is that demand is increasingly global and has been for some time.’
However, arguably the biggest impact on the latest round of price increases has been the summer’s extraordinary en primeur campaign. Once it became clear that the Bordelais had produced an exceptional vintage in 2009, the rumour mill went into full swing that prices would reach record levels.
Aided and abetted by a strengthening global economy and an unprecedented set of high scores by all the major critics (Parker, Robinson. Suckling and Spurrier), many were predicting that the price of Lafite in particular could reach the level of 1000 euros by the end of the campaign.
This inevitably made the back vintages look exceptionally good value. So a number of fine wine traders and fund managers piled into the market to pull off a series of speculative relative value trades in advance of the campaign. As a result, the most fancied and under-valued vintages such as 1996 and 2000 began to move sharply upwards. In February, the 96 Latour was trading at £4,800. By the end of May it was £6,600. Even more marked was demand for Lafite 2000. Over the same period of time, it went from £14-15,000 to over £18,000 per dozen.
As expected, the 2009s have now been sold at record release prices with wines like Lafite, Latour and Le Pin trading on the secondary market at well over £1,000 a bottle. Despite (or perhaps because of that), many of these wines have been bought for investment purposes.
Ironically though, it remains to be seen whether these wines will prove to be sound investments. According to recent research by Liv-ex and the Wine Investment Fund, the returns from en primeur are mixed to say the least. One reason for this is because the chateaux have increasingly tended to release their wines at full market value over the last decade. As a result, many investment experts will continue to scour the back vintages where they see much better value for more mature wines.
What is clear from this latest and most expensive en primeur campaign is that Asia and China in particular have not dominated the campaign in the way that many people predicted. At Bordeaux Index, en primeur sales accounted for no more than 10% of the vintage. The lion’s share of sales (60%) went to the UK private market with the remaining 30% going to European or UK traders and investment groups. ‘So the widely anticipated rush in demand from the Far East has thus far failed to materialise,’ said MD Gary Boom.
At Farr Vintners, where the company reported a total of 30,000 cases sold en primeur totalling £53m worth of wine, the picture was slightly different. Tellingly, the split in sales was 60:40 (UK:Asia) by value. In volume terms it was 85% to 15% as Far East customers bought the top trophy wines – First Growths and Super Seconds. According to Browett, there was virtually no interest from the USA in the campaign.
This suggests that the wine investment market is not about to broaden beyond the usual suspects in the immediate future. Instead, it will remain focused on a narrow core of established Bordeaux chateaux right at the apex of its quality pyramid.
Where does the market go from here? Some including Bordeaux Index’s Gary Boom remain optimistic about further price rises for the next few months at least. Others think that prices may track sideways now that the en primeur campaign is done and dusted.
Of course, much depends on the global economy. But so far, concerns over a double dip recession, austerity measures in a number of European economies and volatility in the bond and equity markets have had little or no impact on fine wine prices to date.
Over the longer term, fund managers see no reason whatsoever why prices will not continue to climb relentlessly upwards, though not a quite the clip that prices have risen since the beginning of 2010. They point to the market’s healthy rally post the 2008 crash and the fact wine has outperformed many other financial asset classes along the way.
Moreover, according to Will Beck of Wine Asset Managers, this ability to make up lost ground in the wake of price falls is nothing new. ‘Event-driven wine price corrections have occurred four times in the last fifty years. But each one has always been followed by a decade of strong returns averaging 15-23%. I believe that it will be no different this time around.’.
Written by John Stimpfig
How to invest in wine – Advantages and disadvantages of investing
What are the advantages of investing in wine?
The underlying principles of wine investment boil down to the laws of supply and demand. On the supply side, there are relatively few (perhaps only about 75 in total) investment grade labels, whose production levels remain more or less fixed. On the demand side, there are a growing number of high net worth individuals around the world seeking to own and/or drink these wines. Ergo, the only way to ease the pressure is for prices to go up. However, when there is a surplus of sellers over buyers – as occurred at the end of 2008, prices will inevitably fall.
Investment grade wine is also an improving asset. As fine wines mature they become more desirable and therefore more valuable. At the same time, as the wine ages and comes into its drinking window, it begins to be consumed making it even more rare, which in turn adds yet more upward pressure on prices.
Fine wine has seen some astonishing returns, particularly from the end of 2005 to the summer of 2008 when the Liv-ex 100 Index rose from 120 points to a high of 264 points. This came after a period of several years in which prices generally didn’t move very much.
Ultimately, it wasn’t to last forever as the market finally gave way in autumn 2008 to the wider pressures caused by falling equities and the banking crisis stocks as well as the wider effects of the credit crunch impacting on the global economy and investors assets. Most recently, the Liv-ex Index has also put on a healthy spurt increasing by 40% from June 2009 to June 2010.
Wine investors will also be encouraged by the fact that their investments have performed better than most other assets and indices, including the FTSE 100 – particularly in the last six months, during which time it has fallen considerably.
This is no flash in the pan. In the last 20 years fine wine has also outperformed a number of equity and fixed income indices including the FTSE 100. For long term investors (as opposed to shorter term speculators) a well chosen and balanced wine portfolio should provide annualised returns of around 10-12% per annum. However, some investors will have outperformed those figures over the longer term.
In fact, since 2001, when Liv-ex began its 100 Index, wine has significantly outperformed the leading equity indices in western markets with an average annual return of 16%. By comparing other pieces of research it is also possible to look at fine wine returns since 1950. Again the results are extremely positive and remarkably consistent. Since, 1950, the average gross return is 15% and is 17% if you start in 1960.
Wine remains less volatile than stocks and shares, making it a less risky investment. However, with the increasing number of wine funds and more and more private investors coming into the market, it appears that the wine market is becoming more closely correlated with the stock market than was the case two years ago. In the past, the fact that it was not highly correlated with equities, made it extremely attractive to investors looking to diversify a portfolio.
Generally, wine is also regarded as a wasting asset so doesn’t attract Capital Gains Tax. (However, as this area of tax law is complex it is best to take advice from a tax lawyer or tax accountant.) Moreover, if you keep the wine in bond, you also avoid paying VAT and Duty.
What are the potential disadvantages of investing in wine?
When the wine investment market isn’t moving uniformly upwards as it did from 2006 to 2008 and from 2010, it becomes much more of stock picker’s market, which generally requires a great deal of expertise, understanding and knowledge. In other words it’s very easy to make some expensive mistakes unless you know what you are doing. For instance, at the end of 2008, virtually every Bordeaux chateau and vintage dropped significantly in value. Some 2005s dropped by more than 25% in value in the course of two months. Even by July 2010 very few 2005s have made up this lost ground.
Clearly, therefore wine prices can go down as well as up. Even as the market is generally moving up, particular wines will certainly move down. Equally, the converse is true. Therefore, when wine prices are generally moving down, cash rich investors will be eyeing the market with a view to picking up some great deals. Once the market has bottomed out, that is the optimum time go back in and buy. Timing is all.
There are no dividend payments that accrue from wine investment. Moreover, there are the costs of storage and selling which have to be factored in. Both eat into profitability.
Typically, a broker will work on a 10% margin when you come to sell your wine. If you are selling at auction, there are also consignor fees to consider. These generally begin at a maximum of 10% depending on the quantity and quality of wine on offer. So, the higher the value of the wine, the lower the fee will be.
The storage costs of keeping your wine under bond with a professional storage company or merchant also vary but usually cost around £7-10/case per annum. If you have smaller parcels of wine to sell or even mixed cases, you might want to consider selling on www.bidforwine.com which has very attractive commission rates for buyers and sellers.
Some wines may not turn out to as good as initially predicted . Once in bottle, wines are frequently re-rated. A negative re-assessment by Parker whereby a wine drops from 98 points to 94 may well result in a fall in value. Others though may experience the opposite effect in being up-rated. This invariably has a windfall effect of increasing the value quickly and, at times, dramatically.
Your merchant may go bankrupt, in which case you may end up losing your entire investment. A number of fine wine merchants, investment funds and wine investment companies have recently failed because of incompetence or fraud, taking investors cash with them. In 2006, Mayfair Cellars and Uvine went under owing millions of pounds to customers. In 2007, the Cellaret also went the same way.
You should also bear in mind that the wine investment market is largely unregulated, so there is very little protection if things do go wrong. Moreover, anyone can set up a drinks investment business in the UK without having to satisfy the financial authorities that they are running a legitimate business and that they are competent to give drinks investment advice.
Therefore only deal with reputable, long established merchants or companies offering wine investment advice or services. For extra security, you should also consider storing your wine within your own account at an independent bonded warehouse.
Beware of a growing incidence of fake wines circulating in the global market. For obvious reasons, collectors should take the utmost care when buying trophy wines for investment. Most recently collectors like Bill Koch in the US have prosecuted cases through the New York courts over allegedly fake wines. Similarly in 2008, 106 bottles of counterfeit wines were pulled from an Acker Merrall & Condit Sale in new York. Provenance is all and wines with perfect provenance can command a significant premium.
Over the last fifteen years, there have also been no shortage of ‘mis-selling’ scandals in which a number of dodgy wine investment companies have fleeced naïve investors of millions of pounds. Some of these investment companies have been closed down by the DTI, but others are still operating. This is another reason why you should only buy investment grade wine from reputable merchants or proven investment specialists.
How to invest in wine – which properties, regions and vintages
Bordeaux represents 90% of the wine investment market and should take the lion’s share in any portfolio. Here, the top Left Bank Classified Growths represent some of the bluest of Blue Chip wines. So look for First Growth clarets like Latour, Lafite, Margaux and Haut Brion. The Super Seconds (a select number of Second Growths) are also a good source of investment potential. So too are some (but by no means all) 3rd, 4th and 5th growth chateaux such as Lynch-Bages. On the Right Bank, the most sought after names include Cheval Blanc, Petrus, Le Pin and Ausone. Chateau d’Yquem can also provide solid returns from certain vintages.
Beyond Bordeaux, a select number of Burgundies qualify as investments. Here the names to look out for include Domaine de la Romanee-Conti, Coche-Dury, Comtes Lafon and De Vogue. However, the secondary market for Burgundy is much less developed and therefore much smaller.
The same is true of the Rhone Valley, where wines like Guigal’s single vineyard Cote Roties can sometimes (though not always) provide handsome returns. Generally though, the Rhone remains undervalued as a region and has yet to really establish its investment credentials.
A number of prestige cuvee Champagnes are also worth considering for investment purposes including Krug, Crystal and Dom Perignon. In recent years, Champagne has proved a very profitable investment even compared to red Bordeaux. At auction, great prestige cuvees continue to command very high prices.
Italy, Port, the New World – and the Bordeaux cults
Outside of France, investors need to be much more wary. Port is no longer regarded as a good investment bet. Some Super Tuscan wines like Sassicaia can on occasion perform well, as can a handful of Spanish wines. Some Californian and Australian wines have also appeared on investors’ radars, particularly in local markets. However, these generally more modern and less well established wines are more prone to the vagaries of fashion. New and Old World ‘Cult’ wines from California, Australia and Bordeaux ‘garagistes’ are not the darlings of the market that they once were and are best avoided in the current climate.
Generally, the received wisdom when it comes to wine investment is to stick to the very great ‘trophy wines’ from Bordeaux (ie First Growths and top Pomerols and St Emilions) from the best vintages. The best Bordeaux vintages include:
1959, 1961, 1982, 1986, 1989, 1990 1996, 2000, 2005, 2008 and 2009
However, there are always exceptions. As mentioned before, ‘small cap’ stocks like Chateau Lynch Bages can perform surprisingly well for investors, but only from great vintages. Similarly, great trophy wines can offer excellent value in good or under-rated vintages. Poor vintages should be given a wide berth by investors, unless the wine comes from a top First Growth.
How much do I need to invest?
You can invest as little as £500 in a case of wine. But a minimum investment of £10,000 will enable you to create a more balanced portfolio so that you can at least spread your risk across a few Chateaux and vintages. Wine should only be a small part of your total investment portfolio. Moreover, you should not invest more than you can afford to lose.
How to invest in wine – En primeur
Every year, there are numerous en primeur offers from wine merchants, most notably from Bordeaux. However, for many consumers, the en primeur merry-go-round can be a confusing spectacle. So here’s a quick Q&A explaining what it is and how it works.
En primeur is a French wine trade term for wine which is sold as a ‘future’, i.e. before it is bottled – usually the year after the en primeur offer. The most important annual offer comes from Bordeaux.
- How does the system work?
Every spring after the vintage, the great cru classé properties of Bordeaux produce young barrel samples from the previous year’s harvest. These are then tasted and assessed by members of the international wine trade in Bordeaux. The châteaux then release for sale a ‘tranche’ or proportion of their total production at an opening price. This is sold in strict allocation to wine brokers in Bordeaux, known as négociants. The négociants then sell the en primeur offers.
- Why does it work this way?
Mainly because it always has. Moreover, by selling to négociants, the châteaux effectively spread the risk of bad vintages, which they might otherwise be unable to sell. En primeur sales also provide the châteaux with a ready source of cash, which they would otherwise not recoup until the wine was bottled and sold.
As the system stands, the négociants are more or less obliged to buy whatever the châteaux sell. If the négociants don’t buy what they are offered (in a bad year), they risk forfeiting their allocation for next year (which may be a great year). However, the system only works effectively in periods where strong world demand for the great wines of Bordeaux outstrips supply, as is currently the case.
- Is only cru classé Bordeaux sold en primeur?
No. Winemakers whose wines are not classified growths, but whose quality and price justifies a futures allocation, also offer wines in this way. In some cases this is the only way to obtain limited-production wines on release.
- Is it only Bordeaux that sells its wines as en primeur?
No, you will find en primeur offers from other wine regions around the world, including Burgundy, the Rhône Valley, Italy, California and Australia.
- When do you pay?
Consumers pay the opening price as soon as the offer is made by your merchant.
- When do you get the wine?
Usually in spring or summer two years after the offer. Then, once you have paid the additional shipping costs and duty, you can take delivery of your precious cargo. An estimate of these costs is usually given to you when you buy your wine.
- How easy is to get what you want?
It depends on what you want to buy. Because demand is so strong for the most sought-after wines, it helps if you are a long-standing customer of a wine merchant that is offering wines en primeur. If you’re not you may have to go to the back of what could be a very long queue. However, you will have less of a problem with those wines which are more available and less expensive. In order to get some great wines, customers may have to take lesser wines, too, as part of their order.
- Isn’t it better to buy older vintages which have proved themselves in the secondary market?
In the last 10 years windfall profits for investors buying en primeur have all but disappeared as chateaux have priced their wines at full market value – and pocketed the proceeds themselves.
What that means is that while en primeur may still be the cheapest way to buy particular, highly sought-after wines, those wines don’t necessarily make the best investment. A case in point was the 2005 vintage which not only fared badly against other vintages, it is still trading at below its market high of June 2008.
As a result, wine investment professionals are increasingly looking at older wines for more profitable investment opportunities. Many regard the back vintages such as some 1986s, 1900s and 1996s as better value than more recent ones.
This is simply because the wines are relatively (and sometimes actually) cheaper than their sibling counterparts.
Moreover, with greater bottle age, they are going to be drunk earlier. This in turn will reduce supply and simultaneously fuel higher prices. Any such price anomalies as these present good investment opportunities.
How to invest in wine – Tricks of the trade
CONSIDER buying a few large format wines en primeur as these big bottles are relatively rare and often command a significant early re-sale premium over standard bottle sizes. However, you should only buy trophy wines from great vintages. If you are buying Yquem as an investment only buy halves. Do not buy large format Yquem. Half bottles of Yquem trade at a premium because they are more popular, because and are consumed more often. Conversely, large format bottles are consumed much less frequently so tend to hang around in people’s cellars. Generally though, Sauternes is not regarded as a blue chip investment in comparison to the demand for top class claret.
READ around the subject as much as you can. Apart from reading decanter.com and Decanter, key critics to follow include Jancis Robinson, Steven Spurrier and, of course, Robert Parker in his Wine Advocate. For a more academic approach to wine investment buy Mahesh Kumar’s book called ‘Wine Investment for Portfolio Diversification’, published by The Wine Appreciation Guild. More recently published in 2008 is ‘Investing in Liquid Assets – uncorking profits in today’s global markets’ by David Sokilin and Alexandra Bruce. The book is published by Simon & Schuster and costs £17.99. For statistical information on how the wine market is moving check out Liv-ex.com’s various wine investment indices and market updates.
PAY ATTENTION TO PARKER! The importance of Parker points cannot be stressed enough. According to recent research there is still a strong correlation between a highly rated Parker wine and its subsequent return on investment. In the last year, 99-100 point wines have generated twice the performance of 92-93 pointers. On average wines with less than 94 points have underperformed in comparison.
GO FOR A SMALL NUMBER OF HIGH VALUE ITEMS – rather than having lots of cases of more modest wines amounting to the same value. Not only do the top 100 point trophy wines tend to generate more profits, the storage costs of having a large number of cases will eat into your profitability.
Where to buy?
At Auction You will get very good wine advice from the leading Auction houses specialist wine departments – but they are not investment specialists. Until the end of 2008, the Auction market has been incredibly strong and something of a seller’s paradise with a slew of record prices, particularly in the US and more recently Asia. Prices and estimates did drop at the end of 2008 and the beginning of 2009. But since then, the global auction market has also rebounded with vim and vigour, particularly for the most sought after trophy wines with perfect provenance. Remember to factor in the buyer’s premium which can be as much as 15% in the UK. (Currently, the auction market is an excellent place to buy more modest good quality wines for drinking.)
From a Merchant or Broker Remember that brokers and merchants tend to know more about wine than they do about personal wealth management: they are not qualified financial advisors. Nevertheless, some do offer a range of investment services including portfolio management services, cellar plans and advice on investment. Naturally some are better at this than others. So do shop around. Generally though merchants are in business to sell wines from a list and so have a vested interest in whatever wines and advice they are supplying.
Specialist Wine investment Companies Be very careful when dealing with specialist wine investment organisations. There are a few reputable companies who have been operating for over a decade and have a proven track record. But many others should be treated with caution. Do not agree to paying any up front commission fee. Some companies charge as much as much as 25% and are best avoided.
Do not deal with anyone who uses cold calling or strong arm sales tactics. Do not deal with anyone who operates via a PO Box. Be wary of anyone whose prices are too low or too high. Do check that the company is not one of the dodgy investment companies named and shamed on www.investdrinks.org website. Ask around to make sure that the company you are thinking about dealing with is well-known and above board.
Wine Investment Funds There are now several extremely successful and reputable wine investment funds around the world. The advantage of these professionally managed funds is that they tend to be run by ex City investment professionals who are literate in fine wine as well as high finance. Given the complexity of wine investment, it may make sense for some people to hand over the buying and selling decisions to these professional fund managers. Investors can also take advantage of these ‘unit trust’ funds to spread their risk more effectively. Successful funds have also been set up in such a way that investors avoid paying CGT on any gains accrued from selling the fund’s units. Finally, a number of these funds have some FSA regulation.
Of course, investors do pay a variety of fees for the privilege of having their liquid assets managed on their behalf. Do check out what these are and what is the minimum subscription. Moreover, not every wine investment fund has provided gold-plated returns for its investors. In 2005, the AWM fund, an off-shore mutual wine fund run out of Geneva went into liquidation. In the same year, an Australian fund, Heritage Fine Wines also collapsed. Most recently, following the collapes of Uvine, the Amphora Fine Wine Fund has also been closed and its stocks liquidated. In which case, do as much research as you can before putting your money into a wine investment fund.
Where to Sell?
At Auction If you have a large collection of great wines, a good auction house will negotiate down from its standard seller’s fee of 10% commission. Even in the current market conditions, the saleroom is still one of the best places to sell a stellar collection of trophy wines.
To a Merchant or Broker Generally, a merchant or broker will charge a commission of 10%. Some companies also offer an ‘Auction Hammer Price.’
Online Online Private Collectors and investors can also sell (and buy) wines through www.bidforwine.com or at an on-line trading platform such as Bordeaux Index’s market-making LiveTrade at www.bordeauxindex.com In July 2009, Berry Bros & Rudd also created BBEX – allowing Berry’s customers to buy and sell their wines stored with the St James St Merchants for a 10% broking commission.
How do I value my cellar?
You could ask your merchant to value it. If the wines are in good condition and stored under bond, you should be able to get a figure quickly over the phone. For more substantial and complicated collections cellared at home, a private valuation may be required. Another way would simply be to take the lowest prices on winesearcher.com and deduct 10% as the broker’s margin to leave you with a net value. A third way would be to subscribe to an on-line subscription-based product from liv-ex.com called ‘Cellar Watch’. This allows investors to value their cellar using the most up-to-date prices. Fine & Rare Wines also offer an on-line valuation service at www.frw.co.uk
How to invest in wine without buying a bottle
Since 2008, it has been possible for investors to speculate on changes in fine wine prices without having to take delivery of any wine, let alone pay storage charges or worry about provenance. ODL Markets, part of trading house ODL Securities, is offering investors the chance to place spread bets on the future value of the Liv-Ex 100 Index. Participants bet a fixed amount per point of the index that it will go up – or down – on a quarterly basis. All gains are tax-free.
More recently, Intrade Ltd have created the world’s first publicly traded futures contracts written on the fine wine market. Intrade will list on its prediction market platform cash settlement futures contracts based on Liv-ex’s proprietary Liv-ex 100 Index. Significantly, this move will also this give merchants, funds and investors an opportunity to hedge their exposure to the underlying market.
How to invest in wine – do’s and don’ts
DO Develop a good relationship with your merchant or specialist wine investmentcompany. Not only will you get better advice, you are more likely to getpreferential treatment regarding highly sought after wines – particularly ifyou have bought good quantities of wine from them in the past. Most seriouscollectors/investors will also develop relationships with several merchants.
DO compare prices. The spread between merchants’ prices for the same wine canstill vary enormously despite greater transparency because of the internet. Toquickly compare prices visit, www.winesearcher.com.Another good place for competitive, real-time prices is Bordeaux Index’sLiveTrade site at www.bordeauxindex.com.Serious investors and collectors who require more current, historical andanalytical price and market information would be well advised to subscribe toone of liv-ex.com’s products at www.liv-ex.com
DO check the provenance and condition of the wine before you buy it.
DO make sure that your wine is stored in perfect conditions so that it willmature properly and predictably. For longer term maturation, wine requires thecorrect temperature and humidity together with a lack of light and vibration.
DO try to buy amounts of three to five cases per chateaux. Larger quantitiesare always more interesting to Trade Buyers.
DO keep the wine in bond with a reputable professional storage company or winemerchant. Make sure that your wine is kept separate from merchants stock and isclearly identified as your own. Make sure that your wine is insured to its fullmarket value.
If you are investing for the medium to long term, DON’T bank on quick returns.You may be lucky (or clever) in that some wines will go up rapidly in value.Generally, wine prices don’t go up in a linear fashion but tend to experiencefairly short periods of upward activity. Timing is therefore everything when itcomes to buying and selling fine wine. If you are speculating in wine over theshort term, you may see some exceptional returns on your investment in thecurrent bull run. But such speculation will always be a much more risky andvolatile endeavour compared to a longer term investment strategy.
DON’T believe all the hype surrounding wine investment. Sections of the presshave had a field day describing meteoric price rises of wines like 82 Le Pinwhich rose from £350 a case to over £30,000. Such wines are not only verydifficult to acquire, they are also extremely unrepresentative of the market asa whole.
DON’T buy wine which you happen to like, hoping it will go up in value. Stickto the tried and tested investment wines. Personal taste is irrelevant and hasno place in investment decisions.
DON’T buy wine en primeur from a new merchant. If the merchant goes bankruptyou could be left high and dry with no wine to show for it.
DON’T try to sell split or opened cases. The desirability and value willplummet unless it has the full dozen in perfect condition in its originalwooden case.
How to invest in wine – Top Ten Investment Tips
1. Only buy your wines from reputable, well established merchants or suppliers. This particularly applies to en primeur purchases. A small number of merchants have gone bust, leaving consumers unable to get their money back or receive their wine.
2. If you are buying wine from a wine investment company, do not pay an up front commission fee. Some specialist investment companies have been known to charge 25%. Similarly, do not deal with anyone who uses cold calling or strong arm sales tactics. Do not deal with anyone who operates via a PO Box. Be wary of anyone whose prices are too low or too high.
3. Keep your wines in a professionally managed bonded warehouse. This can be done independently through your own account or through your merchant and will ensure that your wines are kept in good condition, which is vital for their resale value. It also means you will avoid paying VAT and Duty when you re-sell your wine. However, do compare storage facilities and prices as they can vary quite significantly.
4. If you are dealing with a wine fund or specialist wine investment company, look at their track record. How have their funds or porftolios performed historically. Also check what charges and commissions are involved.
5. If you are buying independently for a capital return, stick to investment grade, red Bordeaux from the best vintages. Bordeaux makes up over 90% of the wine investment market. Bear in mind that generally, the back vintages offer greater investment potential than more recent vintages. (See Top Ten Investment Brands below.)
6. When you are buying wine for investment (or drinking), always compare prices and shop around. A good way to do this is on www.winesearcher.com
7. Rather than buy a large number of inexpensive cases, it makes more sense to buy a small number of high value wines. Otherwise, annual storage charges will significantly reduce your profits.
8. Generally, wine does not attract capital gains tax as it is considered a wasting asset by the revenue.
9. If you are buying wine, do not invest more than you can afford to lose. Wine has proved to be a resilient asset class over the long term, but recent events have shown that wine prices do go down as well as up. Wine should only represent a small part of your overall investment portfolio.
10. Champagne has provided some very good returns to investors at certain times during the last five years. At times it has even outperformed top class claret. However, only stick to the top prestige cuvees such as Krug Vintage, Roederer’s Cristal and Dom Perignon. Also bear in mind that some consider Champagne to be a more risky investment compared to red Bordeaux.
How to invest in wine – Top Ten traded wines by value
Chateau Mouton Rothschild
How to invest in wine – Bordeaux 2000 price increases
|Property||January xxxx||June 2010|
|Chateau Cheval Blanc||7745||7982|
How to invest in wine – 10 great Lafite investments
|Vintage||January 2009||June 2010|
How to invest in wine – useful contacts
Albany Vintners: Tel: 0845 330 8858. www.albanyvintners.com
L’Assemblage: Tel: +44 (0)1243 537775. www.lassemblage.co.uk
John Armit Wines: Tel: +44 (0)207 908 0660. www.armit.co.uk
Berry Bros & Rudd: Tel +44 0800 280 2440 www.bbr.com
Bibendum: +44 (0)207 449 4120. www.bibendum-wine.co.uk
Bordeaux Index: +44 (0) 207 269 0703 www.bordeauxindex.com
Bordeaux Wine Investments: +44 (0)1732 779343. www.bordeaux-wine-investments.com
Corney & Barrow: +44 (0)207 265 2400. www.corneyandbarrow.com
Farr Vintners: +44 (0)207 821 2000. www.farrvintners.com
Fine & Rare Wines: +44 (0)208 960 1995. www.frw.co.uk
Genesis Wines: Tel: +44 (0)20 7963 9060 www.genesiswines.com
Justerini & Brooks: Tel: +44 (0)20 7484 6400 www.justerinis.com
Lay & Wheeler: Tel: +44 0845 330 1855. www.laywheeler.com
Robert Rolls: Tel: +44 (0)20 3215 0011
Seckford Wines: Tel: +44 (0)1394 44 66 22. www.seckfordwines.co.uk
Tanners Wines: Tel: +44 (0) 1743 234500. www.tanners-wines.co.uk
Wilkinson Vintners: Tel: +44 (0)20 7616 0404
Wine Investment Companies
Magnum Fine Wines: Tel: +44 (0) 207 839 5732. www.magnum.co.uk
Premier Cru Fine Wine Investment: Tel: 44 (0) 20 8905 4495 www.premiercru.com
UK Auction Houses
Bonhams London: Tel: +44 (0)207 629 6602: www.bonhams.com
Christie’s London: Tel: +44 (0)20 7839 9060. www.christies.com
Sotheby’s London: Tel: +44 (0)207 293 6423 www.sothebys.com
J Straker Chadwick: Tel +44 (0)1873 852624. www.strakerchadwick.co.uk
US merchants and auction houses
Acker Merrall & Condit + 001 (212) 787-1700 www.ackerwines.com
Sherry Lehmann + 001 (212) 838-7500 www.sherry-lehmann.com
Zachy’s +001 914-723-0241 www.zachys.com
Hart Davis Hart +001 312.573.5597 www.hdhwine.com
The Vintage Wine Fund: Tel +44 (0)20 7553 4314. www.vintagewinefund.com
The Fine Wine Fund: Tel +44 (0)207 937 0090. www.thefinewinefund.com
The Wine Investment Fund: Tel +44 (0) 20 7478 0901. www.wineinvestmentfund.com
Lunzer Wine Investments Limited: Tel +44 (0)20 7228 7882 www.lunzerwineinvestments.com
Back to top