The main investors in wine are generally fine wine collectors, investment banks operating wine funds, private investors and self-managed super funds.
Wine investment is ideally suited to investors seeking diversification from traditional asset classes and a stable asset for capital growth over the medium term (3-5 years).
Fine wine consistently out-performs shares, bonds and other asset classes. Why?
• It consistently delivered annual double-digit growth
• Investment is less volatile than other asset classes such as equities, gold and oil
• The correlation between financial and fine wine markets is relatively low, providing greater resilience to recessionary conditions
• It is a tax-efficient investment with a potential exemption from Capital Gains Tax (we recommend you speak to your financial advisor for more details on this)
• It is a tangible asset
• There is a finite and reducing supply as vintages are consumed, versus increasing demand
• It provides the ability to off-set currency influences
• Inflationary pressures may drive demand in physical commodities to hedge against devaluation
Investing in fine wine may seem like a relatively new phenomenon. But the truth is that savvy collectors and fine wine enthusiasts have been doing it for several years. By purchasing more cases than they wish to consume, the future sale of the excess cases have funded further purchases. This strategy, coupled with a tangible increase in value, has seen more people participating in wine investment.
Over the last 25 years there is no doubt that wine has been a sound investment, with prices for the best wines rising around 15% per annum. Traditionally the US and Europe have been the largest buyers of Bordeaux Grand Cru classés, but in recent times the Asian market (in particular Hong Kong and mainland China) has established itself as a major hub for fine wine. This influx of demand has put added pressure on an asset, which is finite in its supply.
Unlike any other tangible asset, fine wine has a perfectly inverse supply curve. No matter how good the vintage, once bottled the number of bottles diminish through consumption and cannot be replaced. It is also considered a Veblen good – a commodity for which people’s preference for buying increases as a direct function of their price. A greater price confers greater status, instead of decreasing according to the law of demand.
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