As economic uncertainty prevails into 2011 investors are looking to be even more creative with their portfolios. Fine wine is a proven and robust investment option, but first you must get your market strategy right…
The Liv-ex 100 Fine Wine Index soared by 27 per cent in 2010 consolidating fine wine’s position as an highly attractive investment option. Furthermore the index representing the 100 most sought after fine wines is also up a massive 47 per cent from the end of 2008. Fine wine is securing its position as a viable asset class. Durable to market fluctuations and recession, it offers numerous options for investors looking to diversify their portfolio in this testing economic climate. But for those new to the market there are a number of decisions to be made before you can consider yourself up and running. This is where the experts come in. The New Europe spoke to European Fine Wines about the nature of wine investment and why guidance should be sought.
The New Europe: Describe the characteristics that make fine wine such a unique investment…
European Fine Wines: Fine wine is a luxury product that is highly desired by both old money and new, and ownership is considered to be a mark of sophistication and status. Supply is naturally limited because the appellation imposes the strictest limits on production. Demand is set to grow enormously because of the development of a huge and largely untapped market in China and Russia. These factors all combine to attract a premium price.
TNE: Wine is often described as a ‘safe haven’ for investors. Is this its place in the market? Or is there more to fine wine than that?
EFW: The secret to successful investing is diversity. For this reason alone, fine wine should be part of every balanced investment portfolio. In addition, no other investment has quite the same prestige. And no other investment has the depth of interest that can be obtained from collecting wine as a hobby. There is far more to the subject than just tasting; the wine connoisseur also has a deeper understanding. The expert knows that a great wine is a result of the interaction of the terroir [the wine’s geographic identity] together with the weather conditions, the choice of grape varieties, fermentation process and production techniques.
TNE: There are a lot of vineyards out there producing a lot of wine. Where do I buy?
EFW: Selecting investment grade wine is not a job for the novice buyer. You must be guided by a merchant who understands the market; the most desirable châteaux, the great vintage years, the wines that have peaked and the wines with potential. And most importantly, a merchant who can share this knowledge with you and develop your appreciation of wine.
TNE: Describe your ideal wine portfolio?
EFW: My ideal portfolio would be a collection of wines that has representatives of all the great châteaux, and all the great vintages. It should read like a history of Bordeaux wine production.
TNE: What are the classic pitfalls to avoid as a novice wine investor?
EFW: Don’t buy too cheap. It is better to have one case of the highest quality vintage than ten cases of a low grade wine with no potential.
TNE: If you purchase lots of fine wine as an investment, what do you drink while you wait for it all to increase in value?
EFW: There are many wines that are comparable in quality to investment grade, but due to the appellation system will never attract the same prices. There are many wines that deserve to be great but have been trapped by their geography – they might even be produced next door to one of the renowned châteaux, but are not part of the original designation. The discriminating buyer has the opportunity to achieve real value in their drinking wine.