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Investment analysis: Bordeaux Right Bank

The Right Bank seems to have bucked a downward price trend seen across Bordeaux since 2011 - and only arrested in recent months - but it’s not quite that straightforward, explains Ella Lister.

Chart 1, chart 2, chart 3

Stepping back from the Bordeaux 2014 en primeur campaign, the region’s Right Bank chateaux have appeared to outperform their Left Bank rivals in recent years. Since the fine wine market’s apex in June 2011, the Right Bank 100 index from global fine wine marketplace Liv-ex has risen 8%, while the Left Bank 200 has declined by 16% and the first growths by a whopping 39% (see Chart 1), in spite of the Left Bank regaining a little ground in recent months. On the basis of this simple comparison, the Libourne has proved a superior investment to the Médoc since the slump ensued.

But the picture is not quite so simple. Another Liv-ex index, the Right Bank 50, containing the region’s five most expensive crus, has in fact lost 12% over the same period. Moreover, of the 10 wines comprising the Right Bank 100 index, three anomalies have contributed most significantly to its upswing: Clos Fourtet, Angélus and Pavie (see Chart 3) – the former thanks to high scores from US critic Robert Parker, and the latter two following their promotion, in May 2012, to Premier Grand Cru Classé A in the St-Emilion classification. Exclude these trend-buckers from the mix, and the index would have run more or less flat since mid-2011.

Flat is preferable to the fall suffered on the Left Bank, of course. The Right Bank has proved less volatile over the past decade, oblivious to the rollercoaster ride across the river. In the two years to June 2011, first growths gained 101% (and their second wines 183%), compared with a more measured 34% for their Right Bank counterparts. This is in part due to smaller production volumes and therefore less visibility, less speculation by investors, and less attention from label hunters.

‘There’s so little trading in the Right Bank that it gets sidelined and left alone,’ explains Gary Boom, MD of Bordeaux Index. Miles Davis, partner in Wine Asset Managers (WAM), supports this view, observing that the Right Bank is ‘more collected than traded; so much more defensive’.

That said, there is no questioning the colossal brand power of the very top wines from both St-Emilion and Pomerol, which seems to defy their small production. ‘Cheval Blanc and Pétrus are the two Right Bank wines that enjoy the same visibility in the world’s top restaurants as the Médoc first growths,’ notes Clément Marcorelles, CEO of Wine Services, which analyses market positioning.

This article first appeared in the June issue of Decanter magazine. Subscribe to the magazine here.

Written by Ella Lister

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