In the past, collecting vintage wine was limited to wealthy and privileged individuals. But in recent years, thanks in part to the creation of special investment funds, fine wine has quickly become a viable alternative investment option for smaller investors.
The London International Vintners Exchange, popularly known as Liv-ex, is one organization that operates phone and Internet-based trading within the industry and in turn provides a wealth of information for fine wine investors around the globe. With the help of Liv-ex, fine wine investment has grown in popularity and is now considered to be one of the better performing alternative investment vehicles available. Today, there are 22 countries with 270 wholesalers located all over the world who engage in anonymous trading with Liv-ex.
Wine investors today are either those who buy into investment funds and or the tangible asset itself. In the United Kingdom alone, more than 2 billion dollars worth of fine wine is kept in bonded warehouses, all owned by either funds or private collectors. Furthermore, the market for fine wine investment has already reached 3 billion dollars annually and is continuing to grow exponentially.
Keep in mind that Bordeaux wine is almost the entire basis for the Liv-ex index, in part because those who grow Burgundies tend to have a greater influence over their wine distribution systems. Of the wines on the index, 91.33% are made up of red Bordeaux wines, 3.49% of Burgundy red, 3.32% of Champagne, 0.63% of Italian wines and 0.19% of Rhone wines. In addition, the hall of famers for this list are vintages ranging from 1986 to 2006 from Petrus, Ausone, Cos d’Estournel, Haut Brion, Cheval Blanc and Lafite Rothschild.
According to many, the market for this type of alternative investment has a strong potential for long-term growth – and demand. This demand is further augmented by increased interest from new markets in the Far East and India. With a naturally limited supply and increasing demand, the potential for fine wine investment truly goes up every time a bottle is opened.
Finally, a change in law was made that allows wines to stay untaxed for a longer period of time, compared to the previous limit, which was only two years. As a result of this change in tax law, France introduced the Bordeaux City Bond, which was presented for the first time in June 2009. To date, the only real disadvantage that has been brought about by the growing popularity of fine wine investment is that individual bottles of wine are growing more expensive by the day.
Tags: Fine wine investment, Liv-ex