Investors are turning to drink. No, not to calm their nerves - although they could be forgiven for doing so in this period of unprecedented volatility. The turbulence has prompted them to seek out new opportunities and they are cashing in their stock market chips to acquire alternative investments, such as fine wine. Fine wine is a great way to add diversity to your investment portfolio. Wine is proving to be a stellar investment, far outperforming its rival assets over the past year Imperial Wines Of London. Investors are very passionate about wine, much more so than about stocks and shares. It is a very safe investment and it is very attractive at this time when people are uncertain about the stock and property markets. Right now Asia is really driving the demand. The traditional markets of Europe and America are slightly slower. Hong Kong has capitalised on the rapid expansion of personal wealth in China, to become the dynamic centre of Asia’s wine trade since it abolished duties on wine imports in 2008. Wine imports are poised to set a new record after surging nearly 60 percent year-on-year in the first nine months of 2011 to US$940 million. A Chinese buyer has bought a single bottle of wine for £135,000 in an auction. The six-litre bottle of 1961 Latour went for more than three times the expected price - further evidence of the Asian market’s thirst for vintage wine. The auction of Chateau Latour, a prestigious ‘first growth’ classification wine from Bordeaux, had been highly anticipated and was seen as a key test of whether record demand from Asia would continue. First growth wines derive from a small number of renowned vineyards in Bordeaux. In some areas of the UK, you could buy a house for the price the Latour fetched. It would take the average UK worker almost seven years to buy a bottle. Despite the economic slowdown, the fine wine market has continued to boom in London. Take Chateau Mouton Rothschild 1945. Now much fancied for its sweet, smoky bouquet, glorious meaty essence and flavour of prunes, it would have been much less fascinating when it appeared 67 years ago, and the price a fraction of the £108,000 you would have to pay for a single case today. The key to success in wine investing is to buy from the right year. To take the above example, 1945 was a classic vintage. The quality of the grapes grown in the Chateau’s vineyards in the previous year was still good, but not quite as good as those grown in 1945. So, a case of the Chateau Mouton Rothschild 1944 runs to a more affordable £16,800. Every single vintage is a one off; we cannot turn back the clock to re-create the weather that produced that grape. Even newer wines have increased in value over the past couple of decades. Where, 10 years ago, a case of Chateau Lafite 1982, with its cedar wood bouquet and gentle hint of mint, was worth close to £3,750, it would now sell for as much as £50,000. Had you bought it when it first hit the market, in the spring of 1983, you would have paid about £240 a case. Chateaux Lafite is a red ‘first growth’ from Bordeaux. Most wines at the top of a collector’s list still come from France and the great majority of them are clarets. An ever increasing number of people, perhaps frustrated at the modest or negligible returns available from traditional investments, are
turning to alternatives to boost their incomes. Over the last three to four years, no asset class investment has performed better than Fine Wine. The reason behind the rapid growth of the prices of Fine Wine is very simple; since China opened her borders to international trade, a new wave of wealthy young Chinese have developed a taste for luxury; Louis Vuitton, Rolls Royce, Omega – all count China as their number one growth market, and Fine Wines are going in the same direction. So how does this affect the likes of you and me? The answer is predicated by the fact that Fine Wine has a finite supply. Lafite-Rothschild is currently the favourite wine of China and, consequently, the one that has seen the most dramatic price rises over the last few years. Some vintages are now worth five times what they were only three years ago, but Lafite-Rothschild only produces around 20,000 cases a year; a tiny amount when measured against demand. As demand increases and supply cannot rise to meet it, simple laws of economics dictate that the only thing that can move is the price – and it has certainly moved. There isn’t a single bottled vintage of Lafite-Rothschild from 1996 to 2005 that has not increased in price by 500% over the last five years, and this trend looks set to continue. Although the UK’s consumption and knowledge of wine is increasing, many people are not aware that investing in the very best Fine Wines is so profitable or accessible. Many investors who had never considered adding wine into their investment portfolio have, in recent years, come to appreciate the impressive returns that can be gained from a carefully constructed portfolio. The wines contained within our customers’ portfolios appreciated on average by some 52.3% in 2010. In today’s market, a private investor with little or no wine knowledge can safely build a portfolio of Fine Wine through a specialist wine broker who will then store the wine on their behalf in a government bonded warehouse. What a good investment that could turn out to be; a recent report has estimated that growth in demand for luxury brands in China will increase by an average of 18% per annum until at least 2018 and, as the number of millionaires in China increases (there may be as many as 30 new millionaires created every week!), there is sure to be even more demand for the great Bordeaux wines.
Published on Jul 24, 2012
Published on Jul 24, 2012
Investors are turning to drink. No, not to calm their nerves - although they could be forgiven for doing so in this period of unprecedented...