“Wine makes every meal an occasion, every table more elegant, every day more civilised.
– André Simon
For centuries, wine has played an essential role in our social lives. It has been our most celebrated and revered beverage be it toasting life’s most important occasions or unwinding at the end of a workday with friends.
Not known to many, investing in fine wine, especially those from the right chateaux and in the right vintages, has been around for centuries as well. Wine enthusiasts employed the “buy two, drink one free” strategy where they use the appreciation in value of the first case to cover the cost of the second case which they take pleasure in savouring.
Over time, researchers have observed that the increase of the prices of certain wines were exceptionally consistent. Hence, the birth of the Fine Wine Index in 1982 to track the performance of these “blue-chip wines”. After years of consistent and lucrative returns, fine wine investment is literally in (an asset) class of its own.
High Yielding Coupled with Low Risks
Investment Grade wines have regularly outperformed both traditional and other alternative investment classes with annual returns estimated at 12-30%+ per annum.
With capital growth of over 300% since 1992, wine as an asset class has outperformed more conventional commodities such as gold and major indices such as the FTSE 100, S&P 500 and STI offering significant returns without the volatility of the stock market.
A wine’s lack of price volatility compared to the stock market has been one of its major attractions. The fine wine market tends to be less volatile than financial markets, and is less susceptible to market downturns and adverse economic conditions. Not only is wine investment more resistant to financial market instability, studies have also shown that it emerges and recovers sooner than many other financial tools.
The production of Bordeaux wines is regulated by strict French laws, under the jurisdiction of the Appellation Contrôlée Authorities in Bordeaux. If you owned a vineyard in Australia and wanted to increase your profits, you could simply plant more vines, which would decrease the value. However, that’s not the case in Bordeaux. Each chateau’s production is limited by law. You are investing in a tangible and finite asset which evolves and improves over time.
Worldwide demand for the best wines from the top vintages inevitably pushes the values of these wines up as they mature and are ready to be consumed.
Other advantages of Fine Wine Investment over other structured investments include the following:
Increasing World-Wide Demand
Not subjected to annual management fee