Fine wine investment – Tracking the industry performance

 Investors from various areas are making profits in the ever-growing sector of wines. The inflation rates, interest rate effect on the bond market, and higher equities – provide an opportunity for investors to buy safe long-term investments, which are not subjected to inheritance tax or capital gains. 

The investment in collectables has a low correlation to other assets, which can help diversify. It provides a hedge against inflation and currency devaluation and can give the aesthetic pleasure of owning a passion investment.  

As a collectable asset, wine provided 9% returns in the last 12 months and 147% in 10 years (Knight Frank - The Wealth Report 2019).   

Fine wine provides steady positive returns, outperforming government bonds, cash, and real estate investments. It provides a long-term investment, which can be gained by an investment of over ten years. 

During the financial crisis, the French Bordeaux can retain value while investing in vintage and region – the two areas offer significant returns. The data y-o-y finds it was able to deliver double digital returns as the market grew by over £3 billion in a year.

Fine wine has been given the status of a wasting asset, which means there is no need to pay tax on the profits made from the sale of such items. The weather last year was freakish, which led to an increase in price where the upmarket produce of Burgundies grew in the range of 15% to 25%.  

 Burgundy and Bordeaux have been steadily consolidating strong gains in the last two years, where the market rose 10.2% over 2018. Burgundy has been a major driver, with gains of over 35%. 

Invest seek to park their earnings in collectables.  

On average, a good quality wine can deliver in the range of 10 to 15%. At a time when other options like bonds or shares have offered lucrative returns in the last few years and analysts are predicting a slowdown due to global economic slowdown and trade disagreements, investors want to park their earnings in assets like cars, art and wines.   

The attractiveness of the asset class grew due to predicted turmoil in the geopolitical conditions caused by US-China trade issues and Brexit. 

Most popular vintages tend to get up to 20% to 40% returns, but investing in such areas requires expertise. Alternatively, the investors can hire an expert agency, which charges a management fee, storage fee, and commission; nevertheless, it is necessary to hire a trusted agency to prevent fraud.  

Some risks are associated with the class, like the oversupply of certain investment –brands, even when the demand is high, can result in a loss. En primeur is the most expensive investment where one can invest in bottled wines, but there is no guarantee on how the bottles will be received.