The Liv-ex 100 index has impressively outperformed many more traditional investment areas in recent years, suggesting once more that trading fine wine may be considered a sound alternative area of capital growth.
During the last three years, the Liv-ex 100 index has soundly outperformed the FTSE 100 Index, and many savvy investors have taken advantage of this as an alternative investment option since the economic slump shook the people’s confidence in traditional stock markets. Liv-ex was created to track trades of 100 of the world’s most popular vintages, 90 of which are wines from Bordeaux, which seems to be in the midst of its most successful year on record. Furthermore, since wine is considered to be a diminishing asset, it is exempt from capital gains tax, and if it is held in an approved bond facility there is also no VAT.
Perhaps even more impressively, some wines have outperformed gold over a 25-year period, and this year is looking like no exception. In fact, the Wine Investment Fund, one of the few funds in this sector that has holdings totaling more than £20m announced that it is projecting an annualized return for 2009 topping 16 percent. Since these funds are structured to run for five-year segments, this would mean that 2005’s investors have doubled the amount of their initial investment. Also of note, the economic slump and credit crunch did not seem to affect the fund’s performance in 2004, when investors made an annualized 13.01 percent when the fund matured.
Since the Bordeaux 2009 vintage is not yet bottled and may not be best to drink for five or ten years, many savvy investors may choose to wait until the wine develops a strong trading history before getting involved. For this reason, many of the older vintages are still believed to hold the greatest potential for gains, since the quantity is limited and their popularity continues to grow worldwide.
Tags: Bordeaux 2009, Liv-ex