Wine Investment is a low-risk, highly stable investment which has consistently delivered double-digit returns since reliable data first became available, often outperforming conventional investment routes such as the FTSE. With a growing market base valued at $4bn dollars and rapidly expanding markets in the BRIC economies, wine is a fantastic alternative for investors looking for a good return without taking an inordinate amount of risk. Using the average return in the last 20 years of 14.9%, £1,000 invested in 2003 would have appreciated to £4,010 today.
When viewed in the long term, fine wine is a surprisingly low-risk investment – on average, the market delivered an average compound annual return of 11.7% on 5 year investment periods between 1987 and 2007, without a single negative period. Measured in the same way, the FTSE posted losses 24% of the time, and investments in gold posted losses 43% of the time in the same period.* Additionally, fine wine performance does not generally correlate with equities, making wine a smart choice for investors in times of economic uncertainty.
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Reasons to Invest in Wine
Wine Investment offers several unique elements which cannot be found anywhere else. A few of these include:
- Improving asset. Although there are many tangible assets out there (art, gold, classic cars etc) fine wine is one of the only asset in the world which actually improves over time. Even without price rises caused by differences in supply and demand, wines improve with age, and this rising quality is reflected in rising prices.
- Unique supply and demand dynamic. Even in the best vintages with the highest quality grapes, Châteaux are unable to increase production due to appellation controllee laws. With the influence of climate change, investment-grade wine production in the future is likely to be reduced even further. Meanwhile, as shown by the explosion in Chinese demand for fine wines in the last few years, demand is growing rapidly, and widening to include new markets, including the BRIC economies.
- Diminishing supply. A simple but often overlooked aspect of wine investment, supply will never increase – unlike company shares or bonds which can always be devalued by an increase in supply, fine wine supplies will reduce as they are consumed.
- Tax efficiency Wine is classified as a chattel by HMRC, fine wine investment is exempt from capital gains tax in the vast majority of cases.** As wine is stored in a bonded warehouse it is also exempt from import duty and VAT, which is a huge boon for investors.
- Tangible value. While wine is an investment like any other and therefore not totally free from risk, the value of the wine is not so much derived from market factors but rather from the quality of the wine itself. This means that the wine will never lose all of its value, and will always be worth something for the person who owns it.
- Liquidity. Unlike other alternative investments such as fine art which require very high levels of investment and are difficult to sell, fine wine has a dedicated exchange in the form of Liv-Ex, providing transparency and liquidity for investors who are looking to sell. Additionally, wine can be sold at auction, to a merchant, brokered out to other clients or sold privately, meaning that taking profit on your investment is much easier and more flexible than with many commodities.
Investment Wine Selection Strategy
The Vin-X team includes analysts, financial experts and wine specialists who collectively review economic, political and financial information alongside wine industry specific data including:
- Individual brand performance of key chateaux and vintage
- Climatic effect
- Critics’ appraisals and scores
- Supply and demand dynamics
Vin-X’s investment wine selection strategy mirrors the key focus of the fine wine investment market, which is on mainly the wines of the top twenty-five Bordeaux chateaux. The key reason for this is there is an established market for these wines, which are understood to account for 95% of the global secondary market in fine wine. This dynamic provides a reliable exit for investors and the opportunity to realise gains.
The Vin-X selection policy focuses primarily on the blue-chip Bordeaux First Growth wines and then a collection of wines dubbed the ‘Super Seconds’, which include the following:
First Growths: The Medoc region, on the left bank of the River Gironde is the pre-eminent Bordeaux appellation and home to the regions most prestigious names: Chateau Lafite-Rothschild, Chateau Latour, Chateau Margaux, Chateau Mouton-Rothschild, Chateau Haut-Brion .
Second Growths: Leading estates on the ‘Right Bank’ of the River Gironde, in the St Emilion and Pomerol appellations, are home to the regions most desired and expensive names and include: Chateaux Ausone, Chateau Le Pin, Chateau Petrus, Chateau Cheval Blanc.
Collectively the wines above are referred to as the ‘The Big Nine’ and are key to Vin-X’s investment wine selection strategy along with other Super Seconds and Parker’s Magical 20 wines, tipped as some of the ‘hottest wine investment of the future’.
More information on Wine Investment with Vin-X
*Source – Mahesh Kumar, Wine Investment for Portfolio Diversification ** For more details, please ask your Vin-X Wine Broker, or consult a tax professional