Why Invest in Wine? - Market Performance

Wine investment is not a new phenomenon, however historically this lucrative sector was the domain of the knowledgeable few. In recent decades private investor experience and confidence has grown significantly with a marked increase in individuals active in the financial markets and seeking out new investment opportunities such as fine wine. Furthermore, the recent significant growth of Asian and new economy consumers has had a dramatic effect on the market dynamics with staggering growth in both short and long term investment periods.

Source: Liv-ex.com, Janurary 2011.

Fine wine investment - Key Facts:

• Fine wine has outperformed almost every major financial index in the last two decades and in some periods outperformed gold and crude oil investments.
  
• Whilst value growth can in some exceptional vintages spike significantly exceeding, for example, 20% growth per annum, the general demeanor of the market is one of stable returns and low volatility.
• Five year average performance of wines quoted on the Liv-ex 50 and Live-ex100 indices showed growth of 270% and 192% respectively. See table 1 below.
  
• Fine wine has low correlation to other investment classes and has demonstrated historically that it is a recognized “safe haven” during periods of recession and financial turbulence.
• Growing global consumption strongly influenced by the new consumers from the BRIC countries.
• Influence of currency dynamics with the predicted strengthening of the Chinese RMB could further increase Asian consumer demand.
• Finite supply of investment calibre wines.
• Tangible investment
• Inflationary pressures may lead investors to seek out physical commodities to hedge against devaluation.
• Potential beneficial tax treatment of asset, consult your financial advisor and read further detail here.

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