Food and wine is doing a good job to explain the current trend to invest in wine. Food and Wine explains that many people have become wine investors by accident. Once their cellars are overly crowded they decide to sell some of their wine and surprisingly for them, reap a nice profit as the wine prices have been constantly raising.
Because of this phenomenon many investors have started to buy wine for the sole purpose of re-selling it later. To these investors, wine isn´t a drink, it´s an asset. Food and wine states that “Many investors in wine funds have no desire to actually drink any of the great bottles in their portfolios, preferring that they remain in a professional, temperature-controlled storage facility that can keep them in pristine condition, and thus protect their value”.
Wines are being stored in professionally managed storage facilities. This is important because wine is going to lose a lot of value if it´s not stored in a professional place. It´s important to know that if you store wine in your own cellar, the wine is going to lose some of its value. That´s the reason storing the wine in a professionally managed facility is important. Another important fact that Food and Wine is highlighting is the relatively high cost of investing in wine. The fees are usually 20 percent of the profits and an additional two percent of the assets under management. If you compare these fees to other investments they are rather similar to those of hedge-funds. Nonetheless the profits have been good so far. According to Food and Wine the Wine Investment Fund has seen annual returns of about 14.5 percent even in this economically dismal year. These results are very respectable, especially considering the difficult economic situation.
One thing is sure, investing in wine is a new trend. However, there has been some pessimism recently. The price of Bordeaux has fallen by 24.2 % according to the Liv-ex 50 index.
What do senior advisers of global asset management companies think about it? Alan Brown, employed at Schroders, has been quite optimistic stating that “the price level in 2010 was just not sustainable”. Alan Brown recommends a balanced wine portfolio. He advises to obtain a wine portfolio that consists of a collection of wines from different areas and different countries. He is also joking about the possibility to simply drink the wine should the prices drop too much.
The main thing according to Alan Brown is to “take a long term view”. He stresses the possibility that wine bulls back in the market once confidence is restored and the equities markets improve. This notion is confirmed by the wine experts of Berry Bros and Rud.
The magazine Canadian Living is highlighting the importance of the right vintage and the right region of the wine; according to this magazine following wines are good investments:
– 2005 or 2009 wines from Bordeaux
– 2007 wines from California
– 2006 and 2007 wines from Tuscany
Canadian Living also highlights the importance of the right producer and the age-ability of the wine. Stating that: “Great producers make great wines even in poor years” and that “The longer you can keep a wine, the more attractive it becomes”.
Words of caution from Kate Janecek, according to her, high quality vintages are over-inflated. An example of that have been the Bordeaux vintages of 2008, 2009 and 2010. These wines are produced too often. Contrary to that so-called “cult” wines such as the “Screaming Eagle” have held their value. According to Janecek this is true because of the rarity of the wine.
EF Wines hints at a continuing trend towards labels outside Bordeaux, stating that: “Compared with Bordeaux wines, the Super Tuscans represent good value and have a proven potential for growth. There is an increasing international recognition and appreciation of this fact, particularly in Asia.” These claims are supported by Liv-ex, the Super Tuscan 50 Index has outperformed the Liv-ex 50 since June 2007. More investment tips of EF Wines are the 2010 Pontet Canet and the 1996 Latour. The Pontet Canet is expected to score as good as the historic 2009 Pontet Canet. The 1996 Latour has suffered from recent prince inflation, however, now is a good time to buy.