Bad year for finance, good year for wine

Investors are looking at liquid assets to make a profit in difficult times. Chiara Cavaglieri reports

We know the value of sitting back and enjoying a nice glass of vino. It's just as well, as wine investment appears to be standing up against the ravages of the economic downturn.

With interest rates so low, investors looking to diversify their portfolios are turning to wine as a more profitable option. And the potential for high returns can be impressive. The 2000 Chateau Lynch-Bages Pauillac, for example, was released in May 2001 at £450 per case and is now selling at £1,200 per case. Investors must be prepared to be in it for the long haul, though, as a good vintage takes between 20 and 30 years to mature.

But although the fine-wine market was slow to feel the effects of the credit crunch, there was an impact. "In the last quarter of 2008 we saw a 20 per cent fall in the value of the index," says Jack Hibberd from the London International Vintners Exchange (Liv-ex), which produces an index tracking the world's top wines. "Since then, we've seen an increase of about 4 per cent, and the market has stabilised, but whether that means the market is going to continue to go up, nobody knows."

It's clear that wines are just as capable of falling and rising in value as shares, and those considering making wine a part of their investment plans are advised to limit it to a small percentage of their portfolio. Mark Dampier from independent financial adviser Hargreaves Lansdown argues that people should steer clear if they don't have a genuine passion for it. "If it doesn't come to much at least you can drink the stuff," he says, adding that investors should avoid wine funds, which have high performance fees, and simply buy the wine instead.

Many interested investors prefer to go through a professional wine merchant. Some will charge an upfront fee, typically 5 per cent of the total value of the wine, others may set an annual management charge and all will take around 10 per cent commission when it comes to selling up.

Then you have decide how you prefer to take your booze. Investors can purchase wine en primeur, at the wine's opening price before being bottled. There is also the option to buy wine upon its arrival in the country, two years later, or upon maturity. Buying en primeur is generally the cheapest option but can be risky if it turns out to be a poor vintage. "These haven't been bottled and aren't in the country yet so you need to be careful who you buy from and feel confident that the company will still be around in two years' time," says Joss Fowler from wine brokers Berry Bros & Rudd. The wine market is unregulated and there can be disreputable traders so it is usually advisable to go with well-established wine brokers.

Fine wines can be ruined if they are stored incorrectly, so most merchants advise investors to store wine "in bond" in a warehouse for an annual fee (usually per case). Check that the wine is insured properly for replacement value, not purchase price.

When it comes to picking the right wine, the top 20 chateaux of Bordeaux, which regularly produce fine wines and have quantity limits in place, account for the most trading activity and could be a good starting point. Researching the industry is vital and it's a good idea to join a wine club. Try to keep an eye on the Liv-ex index for any shifts in the market.

"I would recommend the 2008 Chateau Lynch-Bages at £390 per case in bond, on the basis that it's an excellent Lynch-Bages. It had a positive review from commentator Robert Parker, and is less expensive than any other vintage of Lynch-Bages on the market," says Mr Fowler.

When it comes to selling your cases, several options are open to investors. You could go back to the merchant you originally bought from and see what price is offered. Wine can be sold at auction houses such as Christie's and Bonhams, although there will be auctioneers' fees. For a quick sale, investors can try a wine broker but this will usually give a poor return. On the plus side, though, unless the taxman believes your wines can be kept for longer than 50 years, they are deemed to be a "wasting asset" and are exempt from capital gains tax, unlike profits made from shares.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
Voices
The Sumatran tiger, endemic to the Indonesian island of Sumatra, is an endangered species
voicesJonathon Porritt: The wild tiger population is thought to have dropped by 97 per cent since 1900
News
These photographs released by the University of Maryland Medical Center show images of full face transplant recipient 37-year-old Richard Lee Norris of Hillsville, Virginia
mediaGQ front page features man who underwent full face transplant
Sport
Lionel Messi looks on at the end of the final
football
Arts and Entertainment
tv
PROMOTED VIDEO
News
Prince Harry is clearing enjoying the Commonwealth Games judging by this photo
people(a real one this time)
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
Life and Style
Attractive women on the Internet: not a myth
techOkCupid boasts about Facebook-style experiments on users
Sport
Van Gaal said that his challenge in taking over Bobby Robson's Barcelona team in 1993 has been easier than the task of resurrecting the current United side
football
News
The Swiss Re tower or 'Gherkin' was at one time the UK’s most expensive office when German bank IVG and private equity firm Evans Randall bought it
news
Sport
Moeen Ali wearing the 'Save Gaza' and 'Free Palestine' wristbands on his left arm
cricket
Arts and Entertainment
The Great British Bake Off 2014 contestants
tv
Life and Style
tech
Arts and Entertainment
filmThe Battle of the Five Armies trailer released
News
news
Arts and Entertainment
Beast would strip to his underpants and take to the stage with a slogan scrawled on his bare chest whilst fans shouted “you fat bastard” at him
musicIndie music promoter was was a feature at Carter gigs
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    HR Business Partner (Maternity Cover 12 Months)

    £30000 - £34000 Per Annum 25 days holiday, Private healthcare: Clearwater Peop...

    Business Analyst - London - Banking - £400-£450

    £400 - £450 per day: Orgtel: Business Analyst - Credit Risk - Banking - London...

    Project Manager,Conduct Risk,London,£5-600pd

    £500 - £600 per day + competitive: Orgtel: My client, a leading bank, is curre...

    Senior Fund Administrator - Edinburgh - £22 p/hr

    £20 - £22 per hour + competitive: Orgtel: Senior Fund Administrator, Top Four ...

    Day In a Page

    The children were playing in the street with toy guns. The air strikes were tragically real

    The air strikes were tragically real

    The children were playing in the street with toy guns
    Boozy, ignorant, intolerant, but very polite – The British, as others see us

    Britain as others see us

    Boozy, ignorant, intolerant, but very polite
    Countries that don’t survey their tigers risk losing them altogether

    Countries that don’t survey their tigers risk losing them

    Jonathon Porritt sounds the alarm
    How did our legends really begin?

    How did our legends really begin?

    Applying the theory of evolution to the world's many mythologies
    Watch out: Lambrusco is back on the menu

    Lambrusco is back on the menu

    Naff Seventies corner-shop staple is this year's Aperol Spritz
    A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

    A new Russian revolution

    Cracks start to appear in Putin’s Kremlin power bloc
    Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

    Apartheid’s sadistic killer that his country cannot forgive

    The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
    Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

    Standing my ground

    If sitting is bad for your health, what happens when you stay on your feet for a whole month?
    Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

    Greene prays for chance to rebuild after injury agony

    Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
    Israel-Gaza conflict: Secret report helps Israelis to hide facts

    Patrick Cockburn: Secret report helps Israel to hide facts

    The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
    The man who dared to go on holiday

    The man who dared to go on holiday

    New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
    Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

    Best comedians: How the professionals go about their funny business

    For all those wanting to know how stand-ups keep standing, here are some of the best moments
    The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

    The Guest List 2014

    Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
    Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

    Jokes on Hollywood

    With comedy film audiences shrinking, it’s time to move on