Is Wine Investment a Vintage Idea?

As one of the most popular types of alternative investments to gain public attention in recent years, fine wine has now become a very popular asset class. It has the proven ability to provide high returns in the double digits, plus providing exposure to the Chinese market, which looks to be increasingly important over the next ten years.

Two International Monetary Fund (IMF) economists published a 19-page report showing that the performance of fine wine investment actually works in relation to the wider economy. If we are to compare the advantages of alternative investments, fine wine is often considered more attractive than other alternatives, in part because investors can always drink the contents of the bottle, which is not possible with a barrel of oil or a work of art. So when times get tough for fine wine investors, they can always opt to pop a cork or two and enjoy some of the best-tasting wines ever produced, regardless of the profits that are realized.

Depending on the state of the economy, some fine wine collectors will have doubts about selling items from their collection, especially if the market is seeing falling costs associated with certain bottles. But during these times many buyers are also generally quite ecstatic about the opportunity to buy certain Bordeaux wines at a discounted price. Also, in this case Bordeaux chateaus that sold their wines as investment “futures” can eventually experience deflated prices compared to what they once were, prompting some collectors to sell.

Let us take for example the 2006 vintage. After the bottles were delivered, the value for each bottle of wine had not increased and, worse, there was a good possibility that prices would fall. Miles Davis, who was a partner of Wine Asset Managers in London, pointed out that the trend in 2006 was for a strong start to trading, while 2008 was when alternative investments like fine wine ‘went physical,’ with prices rising dramatically, followed by a rapid decline.

Financial experts agree that fine wine investment should not account for more than 10% of most investment portfolios. Even though the current investment activity of fine wines from around the world totals more than $3 billion annually, it is still wise to use a conservative approach when approaching any alternative investment. Thanks to a strong growing interest among Chinese consumers, however, there is still much potential for growth among fine wine investments in the years to come.


Leave a Reply