Investing In Wine
Wine is, to me, more than just a drink it is a social history but for those with an eye for it, wine can be a serious financial winner as well.
To me drinking wine is only a part of the story, I love the backstory to the regions, the history of the chateaux and the way a wine evolves over time. Wine is, to me, more than just a drink it is a social history but for those with an eye for it, wine can be a serious financial winner as well. Let me explain.
To start with this is not for the ‘happy amateur’. There are tens of thousands of vineyards out there, many of them make rubbish, most make nice wine that is delicious to drink. Simple so far.
Some make really good wines but most of these do not increase in value including, sadly, our own Chateau du Faure Haut Normand. Some wines cost an awful lot more than others with little discernible difference to the average palette – we are not all Jancis Robinson or Robert Parker. Still no rocket science here.
Some wines are different, not only do they increase in value over time, they do so at a rate that no equity can match. As an example, over the last 5 years the globally recognized CW index has risen 4.7%, in the first quarter of 2020 Italian and US investment grade wines grew over 2.5%. Furthermore, if you are UK tax resident you pay no tax* on any gains you make.
The problem is that if you do not know which wines fall into this category you may end up taking an expensive bath. Working out the best opportunities requires a substantial depth of understanding and knowledge of the global wine trade, a finger on the pulse of the chateaux owner’s mindset and insider knowledge of every vintage and vineyard.
Here at Bordeauxwine.fr we have linked up with Cult Wines, a world leader in wine investment, to bring a combination of our detailed insider knowledge of Bordeaux with their global market intelligence and awesome buying power.
Cult Wines is one of the world’s leading wine investment companies, with a global client base, and assets under management exceeding $200 million. The company was founded in London in 2007 and has since opened offices in Hong Kong, Shanghai, Singapore and New York.
Cult Wines provides fine wine investment advice using algorithmically based models applied across historic and projected data. The company tailors each investor’s portfolio to their specific risk appetite, investment level and target returns. The firm’s rigorous due diligence and investor protection measures help to ensure that only the highest-quality assets are included its investors’ portfolios.
We have set out below a series of Q&A’s to help answer any questions you may have. Alternatively click on this link and you can learn more Cult Wines & Bordeauxwine.fr
What are the 3 main reasons to use wine as an investment vehicle?Undoubtedly the 3 main reasons for investing in wine would be diversification, long term stability, and growth potential.
Stability – Fine wine boasts a remarkable track record of stability through different market backdrops, including the recent coronavirus volatility as well as the GFC over a decade ago. Indeed research from Credit Suisse and HEC Paris in 2018 indicated fine wine has shown long term inflation-adjusted returns of 3.7% per annum from 1900-2018.
Diversification – Fine wine prices are primarily driven by an ever-increasing supply and demand imbalance, meaning they do not tend to move in-line with traditional financial markets, historically showing very low correlation to equity markets. For example fine wine lost only 1% of value in 2008 (compared to the MSCI at -42%) and showed none of the volatility seen in equities in 2020.
Growth – Fine wine has posted a 7.8% annual growth rate going back to 2004. Additionally, the increasing breadth quality of the global fine wine means that the market as a whole is more immune to regional-specific risks such as trade tariffs, seasonal quality variations and natural loss of crop through issues like frost and wildfires.
What has the performance been like over the past 1,3 and 5 years compared to other investment vehicles?The Liv-ex 1000, an index that tracks the price of 1000 of the world’s most-traded fine wines and the broadest market index, returned 2.0% in 2020, has a 3-year return of 7.5% and 5-year return of 45%.Cult Wines returned 5.8% in 2020, has a 3-year return of 11.4% and a 5-year return of 53.1%, equating to a compounded annual growth rate of 8.9%.
Is there any minimum investment? The entry point is £25,000 to ensure all portfolios all well diversified across region, vintage, producer etc.
How easy is it to cash in a part, or all, of my investment? Very easy, there is no lock up period. Cult Wines have a major global trading network, and when a client wishes to exit the market their wines are listed for sale on our price list, which is sent daily to major wholesalers, brokers and merchants worldwide. Average sales period is 6-10 weeks but can be considerably shorter for smaller portfolios.
What are you charges? Cult Wines clients pay an annual fee of just 2% inclusive for everything – storage, insurance, brokerage, management, trading, and research. There is an “acquisitions and operations fee” on entry tiered by investor level of 5%, 2.5% or 0%. Clients pay investment market prices, and thus there is no spread. Bordeauxwine.fr take their fee from Cult Wines so there is no incremental cost to working through us. Effectively we provide an additional level of client service at zero cost.
How much input can I have in choosing the wines?
Clients pay us to build a well-diversified investment portfolio based on their risk appetite, timescales, investment level and target returns, using our experience, know-how and quantitative and qualitive research. That being said, we are always happy to discuss in depth all decisions and be led by the client if desired. Bordeauxwine.fr are also always available as a sounding board for clients.
How long do I need to keep my capital tied up?
Recommended holding period is 3-5 years, but there is no lock up.
What is the tax treatment?
There is no duty or VAT to pay on wine when held in a government bonded warehouse – as all of our clients wines are. Regarding capital gains tax, in most of Europe and Asia (not the USA) fine wine is considered a “wasting asset” and thus exempt. Inheritance tax is payable on the market value of the collection at the time of deceased death, much like any other investment. To caveat, we are not qualified tax advisors and would always suggest seeking independent advice based on one’s regional regulations.If you are interested please call us or complete the form on this page and we will get in touch for a no fee, no commitment conversation.
*We are not financial advisors so are not qualified to make investment decisions nor comment on an individual’s tax position. Always seek qualified, professional, independent advice before making any investment decision.
For more information on this service please feel free to contact us by phone or use the form below.