Tag: UK wine investment

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Profiling the fine wine investor in 2024

London city high net worth individuals
  • Nearly 30% of the UK’s high-net-worth (HNW) investors incorporate fine wine into their portfolios.
  • They tend to be cautious, but in 2024, investors with balanced risk profiles are increasingly dipping into the world of drinkable assets.
  • Since last year, the demographic has shifted a little towards less experienced investors, indicating that new HNWs could be getting involved with fine wine.

Fine wine, historically a passion-driven investment, has predominantly attracted older, seasoned investors interested in both enjoying and preserving their wealth. However, recent trends indicate a shift as younger, less experienced investors in the UK are increasingly drawn to fine wine for different reasons – not least because the fine wine market has become more accessible.

Fine wine allocations in investment portfolios

In 2024, nearly 30% of the UK’s high-net-worth (HNW) investors incorporate fine wine into their portfolios.

66% are allocating up to 10% of their portfolio to fine wine, with the remaining 34% reserving over 11%. In 2024, 2% are allocating over a third of their portfolio to fine wine. This trend reveals a more polarising wealth distribution, considering that last year just half of wealth managers kept fine wine allocations under 10%, but none invested over 30% of their wealth in fine wine.

Investors’ risk profiles

Fine wine investors tend to be the cautious type. According to our 2024 wealth management survey, 88% of respondents incorporate fine wine into portfolios for investors with a ‘somewhat cautious’ or ‘extremely cautious’ risk tolerance. As fine wine can help provide stability, it can have a calming influence on overall performance. 

Cautious investment portfolios also generally contain a greater proportion of bonds and cash-like assets. The inflation-resistance of wine can help to buffer out some of the risks this can present over the long term. 

The remaining 12% tend to use wine for balanced portfolios (compared to 10% last year). None of the respondents use the asset for clients with higher risk tolerances.

In 2024, around 2% of respondents are using fine wine for ‘somewhat aggressive’ portfolios. As fine wine has historically exhibited strong growth during recessions and periods of high inflation, it could easily be used to diversify high-risk portfolios. 

Fine wine investment risk profile UK 2024

Investment experience

In line with this trend, over the past 12 months, fine wine has started to move beyond the realm of ‘very experienced’ investors. The slow spread towards ‘experienced’ and ‘somewhat experienced’ investors suggests that fine wine is becoming a more mainstream asset. 

This move could be prompted by the demand to invest in sustainable and low-carbon assets. As this trend is particularly strong with younger investors, it fits that they could have less experience. 

This year, 52% of UK wealth managers rated their investment clients as ‘very experienced’ with fine wine, compared to 62% in 2023. Meanwhile, clients with medium or limited experience grew their fine wine investments.

Fine wine investment experience UK 2024

Fine wine has long been perceived as an exclusive, somewhat intimidating investment, traditionally reserved for a privileged few. But as our recent research indicates, attitudes are slowly changing.

For more information on the changing fine wine investors’ demographics, read our exclusive Wealth Report 2024: UK Edition.

WineCap’s independent market analysis showcases the value of portfolio diversification and the stability offered by investing in wine. Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

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Top reasons to invest in fine wine in 2024

  • Stability, sustainability and increased market liquidity are the key drivers of investment interest in fine wine. 
  • UK investors are also attracted by the tax advantages of fine wine, which is classed as a ‘wasting asset’.
  • Meanwhile, passion investing is on the rise in the US, seeing an 8% uptick since last year.  

Our recent survey among UK and US wealth managers revealed the top reasons why investors are choosing fine wine in 2024. 

While there are differences in their motivations based on demographic, sustainability, stability through different economic environments, and increased liquidity came at the forefront in both markets.  

Fine wine’s stability during market volatility

In uncertain times, investors often seek tangible assets that offer stability. As WineCap’s CEO, Alexander Westgarth puts it, ‘In times of hardship, people want something solid. Literally. Tangible assets like property, gold or fine wine tend to feel more precious during market downfalls’. 

With US market sentiment being one of fear, according to the Fear & Greed index, 74% of US wealth managers chose stability as their top reason to include fine wine in client portfolios, marking a 6% increase from last year.

US investor motivations for fine wine

In the UK, stability came as the second most important factor driving demand for fine wine. It was cited by 56% of our survey respondents, up 16% since 2023. High inflation, slow economic growth and various macroeconomic headwinds have solidified fine wine’s position as a ‘safe haven’ asset, preferred by UK investors. 

Sustainable investing on the rise

Sustainability was the number one reason to invest in fine wine for UK wealth managers, and the second most important factor in the US. 

As we recently explored (‘The growing importance of sustainability in fine wine investment’), there has been a broader global trend where environmental, social, and governance (ESG) factors are increasingly shaping investment strategies across various asset classes, including fine wine.

Research from Morgan Stanley shows that more than half of individual UK investors plan to increase their allocations to sustainable investments in 2024, making fine wine a great investment option. 

According to our survey, 68% of UK investors invest in fine wine because of its low-carbon benefits, with many fine wine producers leading the charge in sustainable viticulture. 

Improved liquidity

Investors in both the UK and US recognise that the fine wine market is becoming more liquid. Advances in technology have opened up new avenues for investors, simplifying buying and selling processes, improving price transparency, and shifting perceptions of fine wine as an “illiquid liquid.”

As a result, UK investor confidence in the market’s liquidity has increased by 32% in 2024. As for the US, there has been a 14% increase from 2023. 

UK tax benefits

UK investors benefit from fine wine’s status as a ‘wasting asset’ making it a more tax-efficient investment. As of April 2024, UK investors pay up to 28% tax on profits over £3,000. Pre-2022, investors paid tax on anything above £12,300, but the past few years have seen the threshold slashed in a bid to plug the ‘fiscal black hole’. 

As a ‘wasting asset’, the HMRC does not consider fine wine an investment where the profit should be taxed. Investors recognise this benefit, with 90% of our survey respondents noting that the CGT changes will increase the attractiveness of fine wine.

Tax efficiency was the fourth most important reason for UK investors, cited by 38% of the respondents.

UK CGT changes and fine wine investment

The overlap between collecting and investing in the US

Fine wine, long seen simply as a passion asset, has managed to rebrand itself as a sound alternative investment choice. UK investors today focus less on ‘passion’, a motivation that has seen a 16% dip since last year. 

Still, in the US, many investors start out as collectors. ‘Passion investing’ has been on the rise across the pond, with 24% of the survey respondents being motivated by earning a profit and enjoying the experience that comes with owning a fine wine collection. 

For the full breakdown of the reasons why investors choose fine wine in 2024, read our UK and US Wealth reports.

WineCap’s independent market analysis showcases the value of portfolio diversification and the stability offered by investing in wine. Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

 

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The growing importance of sustainability in fine wine investment

  • Sustainability is a major factor influencing investor decisions in the UK.
  • Fine wine producers are embracing sustainable viticulture techniques aimed at reducing their carbon footprint and making a social impact.
  • Fine wine is a forward-thinking sustainable investment choice.

Sustainability is a major factor influencing investor decisions in the UK. Fine wine producers are increasingly embracing sustainable viticulture techniques aimed at reducing their carbon footprint, making fine wine a forward-thinking investment choice.

The evolving landscape of fine wine investment

In recent years, the landscape of fine wine investment has undergone significant changes. Beyond the traditional allure of rarity and prestige, a new motivation is influencing investor decisions in the UK: sustainability.

This shift reflects a broader global trend where environmental, social, and governance (ESG) factors are increasingly shaping investment strategies across various asset classes, including fine wine. Investors are now looking at the environmental impact of their investments, and fine wine is emerging as a preferred choice for those who prioritise sustainability.

UK investors prioritise sustainability

Historically, investing in fine wine has mostly been driven by passion, financial gains, and the status of owning rare vintages from a select few vineyards. 

However, as society becomes more conscious of sustainability issues, there has been increased global demand for sustainable and impactful investing. Fine wine is ideally positioned to benefit from this shift.

Recent research conducted for our 2024 UK Wealth Report found that sustainability has emerged as the most important factor influencing the preferences of both seasoned and novice investors in the fine wine market. 

UK investor motivations 2024

Our 2023 survey found that 56% of investors are attracted to fine wine because it is a sustainable asset class with a low carbon footprint. In 2024, this positive investor sentiment towards fine wine has increased in the UK, with 68% of the survey respondents citing sustainability as their top motivation to invest in fine wine. 

UK investors increasingly recognise the benefits of ethical alignment, accessibility, and financial viability that fine wine brings as an asset.

The benefits of sustainable investing

One of the most compelling selling points of fine wine investment lies in its low-carbon benefits. Many fine wine producers are embracing sustainable viticulture techniques aimed at reducing carbon footprints, as outlined in our Fine Wine Sustainability Report.

Vineyards leading the charge are implementing methods to preserve old vines, adapt to climate change, mitigate environmental impact, and promote biodiversity. These sustainable practices not only benefit the environment but also enhance the quality and longevity of the wine, making it an even more attractive investment.

The expanding appeal of sustainable investing is expected to grow, driven by environmentally conscious investors seeking resilient assets that offer both financial security and ethical value. This trend not only enhances the market appeal of fine wine but also reinforces its status as a forward-thinking investment choice.

A deeper dive into the changing fine wine investment attitudes

For those interested in exploring this trend further, WineCap’s 2024 Wealth Report offers an in-depth look into the top motivations for investing in fine wine, the trends shaping the landscape in the UK, and investor sentiment.

This comprehensive report provides valuable insights for both current and prospective investors, highlighting the growing importance of sustainability in the fine wine market.

Download a complimentary copy of WineCap’s 2024 Wealth Report to gain a deeper understanding of this evolving market and the role of sustainability in shaping its future.

WineCap’s independent market analysis showcases the value of portfolio diversification and the stability offered by investing in wine. Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

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Special UK Report – Fine wine: the journey from passion asset to mainstream asset class

UK wine investment report
  • Our special report, entirely based on primary research, reveals wealth managers’ and financial advisers’ attitudes toward fine wine.
  • Almost all (96%) UK wealth managers expect demand for fine wine to increase.
  • Fine wine is ahead of watches (86%) and luxury handbags (80%) in second and third place respectively.

UK wealth managers see demand for fine wine comfortably outstripping other passion assets, such as watches, luxury handbags, and art. This is one of the findings in our special UK report, Fine Wine: The Journey from Passion Asset to Mainstream Asset Class.

Fine wine – the most in-demand passion asset

The report, based on a study conducted among 50 UK-based wealth managers and financial advisers who only deal with high-net worth clients (£100K+), revealed that fine wine will attract most demand from investors over the coming year amongst all leading passion assets. 96% expect demand to increase, of which three out of five (60%) said that it will increase “significantly”.

This placed fine wine comfortably ahead of watches (86%) and luxury handbags (80%) in second and third place respectively. Other well-established passion assets such as art (68%) and classic cars (62%) placed much lower in sixth and tenth place.

Fine wine in investment portfolios

The report found that fine wine is already featuring prominently in many wealth managers’ client portfolios. UK wealth managers and advisers estimated that over 40% of their high-net-worth (“HNW”) client base invest in fine wine with an average portfolio allocation of around 10%.

Fine wine’s growing prevalence among HNW client portfolios provides compelling evidence, if any is needed, that it has graduated to a genuine alternative asset, a highly effective portfolio diversifier, operating alongside other popular alternatives such as hedge funds, real assets, and private capital as well as mainstream assets such as fixed income and equities.

In common with other alternative assets, fine wine tends to feature more prominently in larger portfolios belonging to more sophisticated investors where there is a greater premium on diversification. Almost all respondents (98%) said that clients investing in fine wine are mainly experienced investors, with 62% saying they were “very experienced”.

Please fill in the form below to download your complimentary copy of the report.