Creating a successful wine investment portfolio
Why entrepreneurs should consider investing in wine – and how to create a portfolio that offers serious returns
With annual growth in the value of fine wines, interest in creating a wine investment portfolio is on the rise among the UK's entrepreneurial community.
Regarded as more enjoyable to have a physical asset over shares on paper, wine investment works on the principle of static and decreasing supply with ever-increasing demand.
The very top wines are only available in finite quantities and as demand is opening up across the world (especially in the BRIC economies as well as in more traditional markets) this means that over the last 20 years fine wine has performed extremely well, with annual growth of 13-15% cumulatively (Liv-ex).
More recently the market has seen a surge in demand for the very top estates in Burgundy and for 2009 Bordeaux, after the influential wine critic Robert Parker released unprecedented scores and described the vintage as the ‘greatest' Bordeaux vintage he had ever tasted.
To give you some idea of how well-chosen wines can appreciate in value, consider the following:
- 2000 Lafite RothschildOpening price June, 2001: £1,850/case 12 bottles in bond Current price February, 2012: £18,000/case 12 bottles in bond
- 2000 Pichon-LalandeOpening Price June 2001 approx £580/case Current price February 2012 approx £2,000/case
- 2009 Pontet-CanetOpening Price June 2010 approx £1,000/case Current Price February 2012 £1,800/case
As with any investment the value of your asset can go down as well as appreciate and a reputable merchant will not make promises on future performance, but will offer advice on a wine's suitability to building an investment portfolio.
An ideal start is to contact one of the long-established merchants. To get started building an investment cellar you'll want to set aside a minimum of £5,000-10,000. This is the first step towards developing a reasonably-sized portfolio and allows for a more flexible, balanced selection of wines which can help in maximising their potential returns.
Always keep your wines stored In Bond (meaning the duty and VAT are suspended and not applicable) and always buy wines in full original cases where the provenance can be assured. Wines should be stored in perfect cellar conditions. At Justerini & Brooks we use Octavian Corsham which is regarded as one of the most ideal places in the world to store and age your wine.
Do your homework to ensure you are buying at the best price.
Only certain wines are considered investment-grade; your merchant will advise you on these but essentially the ‘blue-chip' cases to follow are the First Growths of the 1855 Bordeaux Classification but increasingly certain ‘Super-Seconds' and other high-performing classed growths from Bordeaux as well as selected top Burgundy producers such as Domaine Romanée Conti.
To get you started and if Bordeaux wines appeal, here are a selection of high-performing Chateaux you may well wish to follow:
- Lafite Rothschild
- Mouton Rothschild
- Cos d'Estournel
- Pichon Baron
- Lynch Bages
Finally, follow these five key principles of wine investment and the advice of a reputable merchant and investing in wine could be a rewarding alternative to many other investment options:
- Plan for the future. Wine investment should be looked at as a medium to long term potential gain (five to 10 years)
- Only buy from trusted and well-established wine merchants and never be drawn in by cold callers.
- Buy at the level of risk you are comfortable with as there are low, medium and high risk investment cases which all offer varying levels of potential return.
- Buy cases under bond whose provenance is guaranteed and keep them stored under bond with a professional facility such as Octavian cellars.
- Diversify your portfolio. Trends can come and go and having all your holdings in one or two wines is a risky strategy.
Kate Janecek is a private account manager for Justerini & Brooks, one of Britain's oldest wine merchants, which received the Royal Warrant from King George III in 1760, and has continued to hold each ruling Monarch's Warrant since. www.justerinis.com