If, as the oft-quoted quip goes, men are like fine wine who mature into something one can have dinner with, likewise fine wine can appreciate over time to bring impressive returns for the savvy investor.
Two wine investment experts pop the cork on what’s hot and what’s not on the current market
First CALIBRE speaks to Josh Benbow – Portfolio Manager at Cult Wine Investment
C: What are the big changes in wine investing?
“We’ve found our niche in the market by providing a financial wealth manager’s approach to fine wine investment. The traditional merchants do not treat investing as their primary focus and that’s where we’ve stepped in.
“We charge 0% when liquidating stock, traditional merchants charge 15-20%, which can shatter your gains. It’s important that investors are able to enter at market price – the lowest possible price on the market – and exit at market price, so the growth is all retained.”
C: Is the average client a hard-nosed investor, a wine buff or a mix of both?
“Due to the level of accessibility we’ve introduced to the business, our clients are perhaps more business minded, rather than the pure oenophile. For the person who doesn’t know a lot about wine, we make it very easy to understand, so we are seeing a much greater interest from the purely investment side – only perhaps around 10% of my client base is a real wine buff, or has extensive knowledge of wine.”
C: What’s doing well at the moment?
“The Chinese market is driving a lot of growth in American wines. Bordeaux 2016 is the latest vintage to be released and a lot of our clients are quite heavily invested in that at the moment because, as a strategy, it has gone upwards of 30% per annum for us, it’s been an exquisite vintage. We’re expecting significant growth there.
“As a suggestion I would hint that people keep their eyes on Burgundy and Domaine Leroy – Leroy is the surname of the famous Lalou Bize-Leroy and she is nearing the end of her tenure at the fine age of 86, so as these big names retire, wines under their names become highly, highly collectible. Add to that the fact they only make batches of 200-250 cases per annum – compared with the 20,000 Lafite Rothschild makes – and you are looking at an excellent investment.”
Next, CALIBRE speaks to Don Kavanagh – Editor at Wine-Searcher
C: What do you think is the underlying appeal of owning/investing in wine?
“I think partly it’s the fact that it isn’t simply an investment, there’s an element of passion about it too. From a financial viewpoint, it’s a savvy investment, with wine (and collectible whiskey) offering some impressive returns, but there’s usually more to it than that for investors; there’s usually a level of involvement and engagement that goes beyond mere numbers.”
C: What is the current state of the global wine market?
“The wine market is in a very healthy shape at the moment. While global production is reasonably stable, more people are drinking better wines, as evidenced by the rise in value of wine sales this year.
“The US remains the big consumer of wine, mostly serviced by its domestic production, but it’s being targeted by other producers as a lucrative market for their wines. For example, New Zealand has shifted focus away from its traditional market of the UK to the US.”
C: What’s doing well at the moment?
“The classics will always offer good returns over time, so Bordeaux, the Super Tuscans and top-end Champagne all tend to do well. The out-and-out star, though, is red Burgundy. The average price of the ten most expensive red Burgundies rose by 16.8% in a year. That’s some return; it’s better than gold, stocks and real estate have managed in the past 12 months.”
C: Is the modern investor motivated by the wine or the money?
“A bit of both. Obviously, wine investment has a profit motive, but it’s also a way to acquire good wines to drink. The traditional model was to buy two cases, drink one and sell the other, meaning you had a case of good wine to drink and you’d paid for it by selling the other case at a profit. But most serious wine investors are in it for the resale value, while the serious collectors are in it for the wine itself, but there are various degrees of crossover between the two.
“A hard-nosed business brain is important, too, because with rarity comes elevated prices and with high prices comes the risk of fraud. There are a surprising number of instances each year where people are conned out of their savings by unscrupulous tricksters promising them access to the world of fine wine and huge returns. There are also people who will sell counterfeit bottles, claiming them to be priceless grand cru wines – the Rudy Kurniawan case being the most spectacular one to emerge so far. So with such potential risk, a healthy skepticism is a necessary attitude.”
With recent reports suggesting the cost of imported wines may increase by more than 20% following the Brexit vote, wine lovers might do well to consider investing in British.
With many high quality, and award-winning, wines grown, made and bottled in England, it isn’t too hard to find something of world-class quality on your own doorstep.