Fine wine delivers stability and growth for investors, says Vin-X

06 April, 2021

We caught up with Katie Souter of Vin-X to learn more about why fine wine could make an appealing investment opportunity during the current economic climate.

What makes fine wine an attractive investment right now?

Fine wine is an attractive investment at any-time as it offers investors stable growth and a valuable tool for diversifying their portfolios due to its general asset performance:

  • Stable, low-risk investment
  • Delivers long-term growth which historically has outperformed financial assets and commodities
  • Diversification potential – fine wine performance is not directly correlated to volatile financial markets
  • An attractive tax treatment – profits made from fine wine sales are generally exempt from Capital Gains Tax (subject to personal circumstances)
  • Tangible ‘real’ investment

Right now, fine wine is continuing to deliver stability and growth as global economies reach varying stages of recovery or recession due to the Covid-19 pandemic. This time last year financial markets went into free-fall and economies around the world were tipped into record-breaking recessions. In comparison fine wine prices, after an initial stall, solidified and have maintained growth throughout the Covid-19 era to date. The key fine wine benchmark, the Liv-ex 100, has recorded 6.7% growth over the 12 months to February 28, 2021. The latst market data to March 3 will be available from Liv-ex to trade members in early April.

Liv-ex, the fine wine market equivalent to a stock exchange, has experienced record growth levels in terms of the volume and value of wine traded on the platform since May 2020 to date and is looking at a very robust 2021.

In addition to the pandemic, US tariffs imposed on European wines imported to North America in 2019 have also just been suspended by the Biden administration, injecting further energy into the market as US buyers take advantage of the four-month window the EU and US have set aside to address the trade levies.

Timing is also interesting right now as we approach the 2020 Bordeaux vintage tastings at the end of April and the sales campaign in May - June. If the chateaux price the campaign keenly, as they did for the 2019 vintage, it could be a very energetic period. Bordeaux has seen strong demand in March 2021, the Liv-ex  Fine Wine 50 index tracks the trade in First Growths and has seen its strongest month in a year.

How does wine compare to alternative investments such as whisky, art, precious metals and so on? What advantages does it have and how has it performed relative to alternative investments recently?

Fine wine is often classed alongside alternative assets dubbed ‘passion assets’, including whisky, art, classic cars, rare watches, coloured diamonds. One of the key differentiators in terms of performance is that fine wine enjoys greater liquidity due to Liv-ex in particular, where more than 500 fine wine merchants in over 40 countries trade and provide transparency on pricing data. This facilitates greater market efficiency and investor confidence. With other luxury collectibles reliant on auctions and private sales, such as art, classic cars and most treasure assets, it is much more difficult to value an asset and there is very little public data available on sales and trends. Furthermore, commissions on auction sales can also have a significant impact on margin.

There may also be different tax treatments, for example Whisky does attract CGT on gains made, as do other assets, whereas fine wine is generally exempt and VAT and Duty payments not triggered unless the wine is moved out of bonded storage, which most investors choose not to do.

In terms of recent performance Knight Frank published its 2021 Wealth Report in March, where is appraises the performance of the luxury collectibles invested in by global ultra-high net worth investors in 2020, see the table below for their findings over 1 year and 10 years to 31.12.2020:

KFLII Asset Performance – to end Q4 2020:

Rank

Asset

1 Year

10 Years

1

Luxury handbags

17%

108%

2

Fine Wine

13%

127%

3

Classic Cars

6%

193%

4

Rare vintage watches

5%

89%

5

Furniture

4%

22%

6

Coins

-1%

72%

7

Coloured diamonds

-1%

67%

8

Rare Whisky

-4%

478%

9

Art

-11%

71%

Source: Knight Frank Wealth Report, March 2021

Fine wine remains consistently in the top three performing luxury assets with the added benefit of being a liquid market.

Do you have any figures that can demonstrate how investors have managed to preserve their wealth by buying and holding wine in recent years? Has wine increased in value above real inflation levels?

Liv-ex publishes wine performance information and ‘trade’ price data, which financial institutions and platforms, merchants and wine investment specialists, such as Vin-X use to provide market guidance and valuations.

Trend information is provided on a monthly basis in arrears, the Liv-ex trade report in March 2021reported the February performance data across Liv-ex key indices, compared with financial markets and gold.

Figure 1: MARKET DATA

INDEX

LEVEL

31.02.21

M.O.M (%)

YTD (%)

1 year (%)

5 year (%)

Liv-ex 50

348

0.4

0.4

6.1

28.3

Liv-ex 100

323

0.6

1.2

6.7

32.4

Liv-ex 500

323

0.2

0.7

5.7

32.8

Liv-ex 1000

361

0.6

1.4

5.3

45.0

Liv-ex Investables

352

0.2

0.7

7.2

32.3

FTSE 100

6,540

1.2

1.2

 -0.6

7.3

S&P 500

3,811

 2.6

1.5

 29.0

97.3

Gold

1,761

 -6.1

 -7.5

 7.2

42.7

Source: Liv-ex.com 28.02.21

The top performing fine wine brands in 2020 are recorded in Liv-ex’s Power 100 report with their average growth performance between October 1, 2019, and September 30, 2020:

Liv-ex Power 100 2020 – Top 10 Price Performance:

Price perf. Rank

Brand

Region

Av market price growth

1

Ca’ Nova

Piedmont - Ialy

28.09%

2

Dal Forno Romano

Veneto - Italy

19.47%

3

Henri Giraud

Champagne

18.29%

4

G.B. Burlotto

Piedmont - Italy

15.81%

5

William Fevre

Burgundy

15.07%

6

Solaia (Antinori)

Tuscany - Italy

14.98%

7

Bonneau du Martray

Burgundy

14.41%

8

Rene Engel

Burgundy

13.12%

9

Conti Costanti

Tuscany - Italy

12.98%

10

Arnoux-Lachaux

Burgundy

12.82%

Source: Liv-ex.com, Liv-ex Power 100 Report 2020

Some investment wines will deliver stronger performance still over different terms. We can see from both trend and individual wine performance that fine wine has outperformed the FTSE 100 over one year and five year periods.

Are there any wines or regions that make a particularly attractive investment right now?

During 2020, wines from Italy and Champagne were in very strong demand, partly because of their exemption from US tariffs and also the sustained secondary market trade in the excellent wines from these regions due to quality and value. The market has continued to broaden since 2018 when Burgundy prices hit a new market height as value was sought away from Bordeaux, this was then diverted into the Super Tuscans and top wines from Piedmont in 2020 along with rarer vintage Champagne.

Burgundy and Bordeaux wines could be seen to offer opportunities right now as the US Tariffs have just been suspended and there has already been a surge in demand. Domaine Leroy, was ranked the most powerful fine wine brand in the Livex Power 100 2020, and enjoyed average growth in value in its wines over 8% in 2020. Allocations are rare but the entry price is affordable for Burgundy, so grab it when you can. See our blog for more.

Bordeaux’s First Growths (Haut Brion, Lafite Rothschild, Latour, Margaux and Mouton Rothschild) are seeing a surge in interest and March 2021 has seen the largest level of trade in a year. The recently bottled 2018 vintage in particular is in demand from US buyers and the 2016 wines are priced well now for future growth, even the First Growths.

Champagne has been the top performing region in the 12 months to the end of February 2021, seeing 10.77% growth and continues to be of interest in Q1 2021 and the major market movers on Liv-ex in February were from the region:

Figure 4: Major Market Movers February 2021

Wine

Vintage

January ‘21

February ‘21

Change

Louis Roederer, Cristal Rosé

2012

£2,890

£3,244

12.2%

Moet & Chandon Dom Perignon, Rosé

2004

£2,325

£2,592

11.5%

Bollinger, Grande Année

2005

£708

£774

9.3%

Moet & Chandon Dom Perignon, Rosé

2003

£2,000

£2,150

7.5%

Moet & Chandon Dom Perignon, Rosé

2005

£2,214

£2,380

7.5%

Source: Liv-ex.com (Mid price:12 x 75), 28th February 2021

Italian Super Tuscans Masseto, Ornellaia, Tignanello, Solaia and Sassicaia are important additions to a fine wine portfolio along with Piedmont’s Gaja and Giacomo Conterno. The 2018 new releases were well received by critics earlier this year.

USA wines saw increased trade in 2020, Screaming Eagle continues to offer superb long term returns to investors and we have been delighted to be able to provide our clients with rare supply of he 2018 vintage recently. Opus One, Harlan Estate and a few other key Napa brands are also valuable additions to a wine collection.

What might investors consider buying if they cannot afford the most expensive options from Bordeaux and Burgundy? Are there any fine wines from less heralded regions / countries that show promise?

The top wines from Italy achieve similar quality scores to the best of Bordeaux and Burgundy, but do not yet enjoy the brand profile or levels of trade in the secondary market that the great Bordeaux First Growths and Burgundy Grand Crus do. Sassicaia, Ornellaia, Masseto and Gaja all made the top ten ranking of most powerful fine wine brands in 2020 demonstrating the demand for these wines now. For value, investors should consider adding these wines to their collection.

Champagne has been a key region for investors and affords an accessible entry point to the fine wine market for investors and along with the aforementioned top market movers in February key brands are Krug, Louis Roederer’s Cristal, Pol Roger and Taittinger Comtes de Champagne.

There are also opportunities in Bordeaux currently as prices have been suppressed and some excellent vintages currently offer value. The 2009 wines have seen strong demand in Q1, partly due to the vintage being an Ox year in the Chinese Horoscope which was celebrated in February. The fact is 2009 is one of the greatest modern Bordeaux vintages and some of the wines are priced well now for future growth, as too are the 2016s. 

The North Rhone wines, particularly Guigal’s and Beauceastel have also being enjoying increased trade.

Have you noticed an increased demand for your services as quantitative easing has ramped up over the past year?

The stable growth the fine wine market has enjoyed during the pandemic has demonstrated the value of diversifying an investment portfolio with fine wine. This has supported growth across the sector, from investment specialists to the trading platforms. We are delighted to welcome a growing number of clients and to help them understand the market and make the most of this exciting and rewarding asset class.

What services do you offer and what makes Vin-X an ideal fine wine investment partner?

Vin-X offers a comprehensive, safe, fine wine investment service where we guide individuals and companies to understand the market fundamentals, provide information on asset characteristics and trend, and then work with our clients to create rewarding fine wine portfolios. Our dedicated portfolio managers will determine our clients’ wine investment aims and structure a portfolio to meet these in line with the preferred investment period and budget requirements.

We arrange the wine supply, transfer, storage and insurance and deliver performance and general market information throughout the investment term until we manage the future sale of the wine. Our systems and controls have been developed specifically for fine wine investment and, as a family firm we are proud to deliver a trusted, market-leading service.





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