Alternatives investments – Fine Wine strategies and risks 

On March 20, Christie held the auction at a British auction house, featuring ten valuable wine lots where nine found a buyer. The most valuable in the lot was a 12-bottle case of Burgundy Domaine de la Romanée-Conti 1988, which got $305,135, and the entire sale earned £1.3m. 

The biddings was made from different parts of the world across five continents, although only 20 people watched it in the auction room. 

Most of the biddings came from remote locations where more than 30 per cent got online buyers, and 41 per cent of the buyers were new clients who were bidding online. The auction included a younger crowd where more than two-thirds were aged from 35 to 55 years. 

One of the most expensive Burgundy sales was the October 2014 114-bottle lot sold by Sotheby in Hong Kong for £1,035,000. The lot held Romanée-Conti Burgundy. 

Screaming Eagle Cabernet 1992 got one of the highest amounts for a bottle with $500,000, where the amount earned at auction was given for a charitable purpose. 

The factors influencing such investments are uniqueness and rarity. The bottles with finite supply from specific regions of the world get higher prices. 

The quantity of wine released in limited editions reduces as it is consumed over time, and the limited number of unconsumed bottles gets huge value at auctions. 

Growing markets 

The wine demand is growing in new regions, mostly South-East Asia – India, China, and Africa. The markets in these regions are expected to grow in the future. 

The decline in pound value and the exit by Britain from the EU will raise demand for wines in England and outside as the buyers can get the bottles at a lower price.  

It offers physical products that can be consumed or auctioned and is considered reliable. If the correct brands are bought at low prices, they can deliver attractive returns. In general, the returns can range from 8 to 12 per cent. 

Some wine enthusiasts invest in vineyards. The French government revealed projects where the investors can pick up a hectare of land in the Bordeaux region for less than $11,400. 

There are many such farmlands available in different price ranges. Some lands are selling at rates over a million euros per acre. In Bordeaux, over 7300 such yards have been sold per the property consultancy VI, and the Chinese acquired more than 150 such farms at a relatively lower price. 

Investors believe the current markets offer higher volatility where the equity investment is overexposed, creating risks that can be reduced by diversifying in alternatives that have a low correlation to the most popular assets. 

From 2008 to 2010, the Liv 1000 return was almost zero, and FTSE lost 25 per cent, whereas gold fell 5 per cent. From 2015 to 2017, Liv 1000 delivered 10 per cent; FTSE gave approximately 9 per cent, and gold was up 8 per cent.