Thirsty for high returns? Get into the market for red wine
The best vintages are proving to be top performers. And in this market, it pays to order the Bordeaux. Kate Hughes and Julian Knight report
Sunday 22 June 2008
The fine wine business is going global, which should be good news for people who invest in a little liquid luxury. And, like everything else in the world economy, or so it seems, prices are being driven ever higher by demand from the Far East, particularly Hong Kong, which earlier this year scrapped wine import duty.
"The demand for fine wine in the Far East is huge," says Joss Fowler of Berry Bros & Rudd, a wine merchant that has been dealing in fine wine for 300 years. "And I personally see no reason for this to slow. In fact, global scarcity and finding the fine wine to sell is our biggest problem now."
Since 2001, the fine wine index, Liv-ex 100, which keeps track of the price of the most traded wines, has convincingly outperformed stock markets across the Western world. But remember, the value of wine investment, like company shares, can go down as well as up.
As far as wine investment goes, shares in red Bordeaux are king, as they have the longest track record of investment performance and consistently come out top at tasting events. Wines from vineyards such as châteaux Haut-Brion, Lafite-Rothschild, Margaux, Petrus and Mouton Rothschild make up a large proportion of the red Bordeaux traded. Of course, not every year produces a great vintage, and often wine funds will try to buy across many different years, spreading risk.
Investors also have the option of purchasing En Primeur, which means the wine is bought on a "futures" basis while in the cask. Buying this way can be risky, as it may turn out not to be a good vintage. Yet the amount paid, called the "opening price" is generally lower than is fetched after the wine is bottled.
The price of top-end investment wines is eye-watering. "A case of the best wine will set you back around £12,000," Mr Fowler says. "But compared to the best items in other markets, like a Picasso or a penthouse in Hyde Park, that is incredibly cheap."
For a private investor, there are three main avenues into the wine world. A specialist fund pools investors' money to buy wine to trade, but that doesn't mean you will get to drink your returns, just as investing a stake in a racehorse won't get you into the saddle. Wine Asset Managers (wamllp.com), for example, offers the Fine Wine Fund, requiring a minimum investment of £50,000. The annual management fee is 2 per cent, plus a further 15 per cent of the fund's annual performance growth.
It is possible to pick up cases of good-quality investment wine at far lower prices. Companies such as Vinum Investments (vinuminvestments.com) will buy and sell cases on your behalf for a single investment of a minimum £1,500, or £100 monthly. The wine is yours, and can be either stored or removed for a special occasion. Investors are charged for storage and services at the time of disposal or delivery, so expect to pay between £7 and £10 a year for each case of wine set aside. Storing this way is a good idea as it provides proof that the wine has been held in the right conditions, which can aid resale.
Buying direct and storing your wine yourself is far more challenging than paying someone to do it for you. No fine wine house sells direct to the public; you will have to buy your vino in 12-bottle "units" through a merchant. Then you'll have to store the wine well. Humidity, light, temperature and movement all determine how successfully your bottles are laid down, and could easily affect the price.
But don't think wine investment is completely immune to the credit crunch. "If you do wish to invest in wine, it will need to be high end or nothing to escape the effects of the economic downturn," says Matthew Woodbridge of the independent financial adviser Chelsea Financial Services.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Liam Neeson's Downton dreams
Thriller is set in the secret world of British espionage
Bomber jacket worn by Mary Berry sells out within an hour
- 1 Scottish independence: Learn from Quebec's mistakes and beware of promises. Vote Yes.
- 2 iOS 8 is full of shiny new features - but it's terrible news for app developers
- 3 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 4 Hitler’s former food taster reveals the horrors of the Wolf’s Lair
- 5 Cocaine and cannabis haul hidden in Vatican car seized by French police
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Scottish independence referendum: A nation divided against itself
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Scottish independence: The Queen breaks silence on referendum debate – as think tank warns of £14bn black hole if Scotland votes Yes
Portuguese academic says British are 'filthy, violent and drunk'
iJobs Money & Business
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...
Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...
Day In a Page
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000