Wine is a better investment than equities, especially in a bear market, a study shows.
University of Fribourg PhD candidates Philippe Masset and Jean-Philippe Weisskopf found that including investment-grade wine in a portfolio increases the portfolio’s returns and mitigates risk, particularly during an economic crisis.
Their study was first published in 2009 and has now been updated to reflect the recent recession.
It compares the performance of wine (based on auction results for the most-traded wines), against that of the Russell 3000 index of the largest U.S. companies, over 13 years.
This period included two bull and two bear markets.
Wine outperformed equities – mainly by holding its value during the recession – with lower volatility.
Top growths in top vintages since 2005 alone have returned 500%, to the Russell’s 50%.
‘That wine does better in a bear market probably won’t surprise people who know wine,’ said Weisskopf.
‘If wine prices go down, you can keep it until they go up – or drink it. You can’t do that with equities.’
The researchers attribute wine’s performance during the boom to the relatively overinflated price of equities.
‘In the 2000s, especially 2003-2007, people in the developed world just got richer and richer, and traditional assets like stocks became very expensive. So investors moved money into things like wine and art.’
Wine fund manager Peter Lunzer argues wine is a safer bet than art.
‘Those of us in the trade have seen prices rise in an extraordinarily predictable way,’ he said.
‘Wine is made in a finite quantity and when it falls below a certain quantity, many years’ worth of data show the price will rise. Yet most people still see it as a bottle and corkscrew rather than a commodity.’
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Written by Maggie Rosen