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
News
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
peopleReports that Brand could stand for Mayor on an 'anti-politics' ticket
News
The clocks go forward an hour at 1am on Sunday 30 March
news
Arts and Entertainment
The Doctor finds himself in a forest version of London in Doctor Who episode 'In the Forest of the Night'
TVReview: Is the Doctor ever going stop frowning? Apparently not.
News
Voluminous silk drawers were worn by Queen Victoria
newsThe silk underwear is part of a growing trade in celebrity smalls
PROMOTED VIDEO
Sport
footballMatch report: Real fight back to ruin Argentinian's debut
News
Candidates with surnames that start with an A have an electoral advantage
newsVoters are biased towards names with letters near start of alphabet
Arts and Entertainment
Isis with Lord Grantham (Hugh Bonneville)
TV
Arts and Entertainment
Jay James
TVReview: Performances were stale and cheesier than a chunk of Blue Stilton left out for a month
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

    Compensation and Benefits Manager - Brentwood - Circa £60,000

    £60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

    Data Analyst/Planning and Performance – Surrey – Up to £35k

    £30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?