Tag: Wine Investment

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Is sustainable wine the next big investment trend?

  • Sustainability in wine encompasses various processes such as environmental stewardship, social responsibility, and long-term financial viability.
  • Sustainability appeals to a growing group of investors who want their money to do good while it grows.
  • Top wineries implementing sustainable practices include Bodega Catena Zapata and Château Pontet-Canet.

The wine investment market has diversified considerably in recent years, with sustainability becoming a core focus. As examined last week, environmental considerations are the number one reason why UK investors choose to invest in fine wine. Today’s article explores the criteria for sustainable wine, its appeal, risks and considerations, as well as the future prospects for this important market segment.

Defining sustainable wine

Sustainability in wine is a nuanced concept that goes beyond certifications like ‘organic’ or ‘biodynamic’ that you might find on a bottle’s label. These certifications are positive indicators but they do not provide a complete picture of a wine’s overall sustainability or its quality. In fact, while organic and biodynamic practices are steps in the right direction, they are not panaceas for all environmental challenges facing vineyards and wineries.

Truly sustainable wines are produced with a broader vision that encompasses not just environmental considerations, but also social and economic aspects. This holistic approach involves responsible land use, ethical labour practices, and a focus on long-term financial viability for producers.

Organic, biodynamic, and sustainable – what is the difference?

Organic wines are made from grapes grown without synthetic pesticides or fertilisers. Biodynamic wines take this a step further by integrating the vineyard into a self-sustaining ecosystem.

Sustainable wines, however, encompass a broader range of practices aimed at the long-term viability of the entire wine-producing operation. Various certifications, such as ‘Certified California Sustainable Winegrowing’, exist to label these wines officially. Organisations such as Sustainable Wine work to enhance clarity around sustainability in the industry as a whole from viticulture to packaging solutions and logistics.

The appeal of sustainable wines

Sustainability appeals to a growing cohort of investors who want their money to do good while it grows. Investing in sustainable wines satisfies this ethical imperative, thereby adding another layer of attraction to the investment.

Studies indicate a rising demand for sustainable products, including wine. This increased consumer demand means greater sales potential and, by extension, a probable rise in value for these wines over time.

Sustainable wines often come with compelling stories of environmental stewardship and community support. This narrative adds a unique selling proposition that can boost brand value and investment potential.

Risks and considerations

Like any investment, putting money into sustainable wines is not without risk. Market volatility, consumer preferences and supply and demand can impact returns as with any other investment-grade wine.

Another risk lies in the potential for ‘greenwashing’, where a wine’s eco-friendly credentials can be exaggerated. Investors must perform due diligence to ensure they are backing genuinely sustainable ventures.

How to invest in sustainable wines

The first step is comprehensive research: utilising online resources, expert reviews, and consumer reports to assess a wine’s investment potential and sustainable credentials. Diversifying your portfolio by including a mix of sustainable wines from various regions and price points can mitigate risks and increase the potential for rewards.

Pay close attention to ratings from renowned wine critics and industry experts. A high rating can significantly impact a wine’s market value.

Sustainability pioneers

Several wineries around the world are setting the bar high for sustainable practices. Frog’s Leap in Napa Valley is known for its organic and dry farming techniques. Germany’s Weingut Wittmann has also embraced organic farming and natural winemaking processes. In Argentina, Bodega Catena Zapata stands out for its sustainable farming and research into high-altitude winemaking. Château Pontet-Canet in Bordeaux is another success story, having converted to biodynamics in 2014 after various setbacks in 2007. Their journey underscores the long-term dedication needed for truly sustainable winemaking.

Future outlook

From water-saving technologies to renewable energy, the wine industry is continually adopting more sustainable practices, pointing to a robust market future. Experts predict the demand for sustainable wines will only grow, particularly as younger generations who prioritise sustainability come of age.

Sustainable wines present a captivating new frontier in wine investment, promising both ethical satisfaction and financial gains. As with any investment, there are risks, but the burgeoning market for these wines, coupled with their unique branding advantages, makes them a trend worth watching. For investors willing to do their homework, the opportunity is ripe for the picking.

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 brands to watch in the 2023 autumn La Place de Bordeaux campaign

  • La Place de Bordeaux is a three-tier global wine distribution system with origins stretching back 800 years.
  • The autumn La Place de Bordeaux campaign sees the release of over 100 different wines from around the world.
  • Discover the brands released via La Place that have made the biggest gains over the past decade.

La Place de Bordeaux is a global wine distribution system that originated 800 years ago in France. The network was originally a hub used just for Bordeaux’s finest wines, where the château would sell to négociants who then sell to merchants.

In recent years, the system has considerably expanded its operations. Other than the spring Bordeaux En Primeur campaign, today La Place releases wines from other parts of the world in the autumn.

Over 100 different wines from Argentina, Australia, the USA, New Zealand, Austria, China, Italy, Spain, South Africa, Uruguay and French wines from Champagne and the Rhône have joined the marketplace since the first non-Bordeaux release of the Chilean brand Almaviva in 1998.

What is driving the La Place expansion?

By selling through La Place, producers have the opportunity to build a global following for their brands, benefitting from the négociants’ extensive reach and expertise in promoting and allocating wines to different markets. Meanwhile, this process guarantees the wines’ provenance, reduces risk, and effectively manages supply and demand.

Négociants also benefit from the expansion of the system beyond Bordeaux by diversifying their revenue streams and reducing their dependency on the châteaux. This is especially true in recent years, which have seen a declining sentiment for buying Bordeaux En Primeur (for more, see our En Primeur Report: Bordeaux 2022 – Unfulfilled Potential).

The transformation of La Place de Bordeaux also reflects the shift in broadening buying patterns in the fine wine investment market.

La Place brands to watch

This autumn will see the release of close to 120 wines from around the world through La Place de Bordeaux.

Some of the most anticipated releases each year include the Super Tuscans Solaia, Masseto and Bibi Graetz, Californian cult wine Opus One joined by estates such as Inglenook, Joseph Phelps and Promontory, the Chilean Almaviva, Vinedo Chadwick and Viña Seña.

Australian wine, which has faced challenges due to the ongoing Chinese tariffs in recent years, has also been aided by the network, with brands such as Penfolds and Jim Barry making waves.

La Place brands

*Explore the performance of different wines on Wine Track, our comprehensive fine wine index that enables you to identify investment grade wines, spot trends and wine investment opportunities.

The table above shows some of the best-performing wines released via La Place over the past decade. These wines, available at various price points, have delivered an all-round positive performance over the past five and ten years.

Rothschild & Concha Y Toro’s Almaviva has seen the most impressive price performance over the last decade, up 132%. Almaviva prices tend to rise with age, and the highly anticipated 2021 vintage is expected to be among the first releases of this autumn’s campaign.

In conclusion, the network’s continually broadening selection showcases its ability to adapt and thrive in a fluid market, acting simultaneously as an indicator of shifting consumer preferences and investment opportunities. As négociants broaden their range and producers tap into this distribution channel with global reach, the impact is poised to resonate well beyond the borders of Bordeaux.

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 impact of climate change on wine investment

Climate change and wine investment
  • Environmental considerations are the number one reason why UK investors choose to invest in fine wine.
  • Fine wine itself is facing the effects of climate change such as reduction in yields.
  • Scarcity can drive demand and prices higher, but also lead to the broadening of the fine wine market.

Climate change and environmental considerations are the number one reason why UK investors choose to invest in fine wine, according to the results of our Global Wealth Manager Survey 2023. Over half (54%) of our respondents cited fine wine’s low carbon footprint as a key reason for adding it to their portfolio.

While there is a strong case why fine wine can be considered an ESG investment that is a good for the environment, fine wine itself is facing the impact of climate change. Like all agriculture, viticulture is at the mercy of the environment, making climate change a pressing issue for wine investors.

Changing weather patterns affect wine quality and quantity – two of the main factors that can make an investment profitable.

How changing weather patterns affect wine quality and quantity

In general, climate change can lead to alterations in grape ripening cycles, water stress, diseases and pests, and can affect berry size and composition.

Rising temperatures can cause early ripening, potentially disrupting the balance of sugars, acids and tannins – factors crucial for the quality of the wine and its ageing potential. Meanwhile, drought and irregular rainfall can lead to excessive water stress in the vines, affecting fruit development. Warmer temperatures can also bring new pests and diseases to regions previously unaffected, while heatwaves can cause grapes to sunburn, reducing yield and quality.

For instance, in 2023, two of the main fine wine producing countries, France and Italy, faced diverse weather patterns. France’s 2023 wine harvest projects between 44-47 million hectolitres, benefiting from potentially strong yields in Champagne and Burgundy. Italy, however, might see up to 14% reduction in yields due to extreme weather, marking it among its smallest harvests.

What does this mean for fine wine investment

Smaller harvests lead to reduced supply, and assuming that demand remains constant or increases, prices tend to rise. When news of a small harvest breaks, especially from a reputable wine-producing region, it can create a buzz in the trade. Buyers and collectors might perceive wines from that harvest as more valuable or unique, driving up demand and, subsequently, prices.

Moreover, a smaller harvest doesn’t necessarily mean reduced costs. Wineries still have to maintain vineyards, pay labour, and cover all production expenses. With fewer bottles to sell, the cost per bottle increases, which can result in higher prices for the consumer.

Supply and demand

This is a particularly pertinent question for regions, where scarcity is the main driver behind their investment appeal such as Burgundy. A recent example was the 2021 Burgundy En Primeur campaign, which saw drastically low volumes. The Bourgogne Wine Board (BIVB) pointed to a crop of 900 to 950,000 hectolitres, representing about 50% of a normal year and 2/3 of the average in recent years.

As a result, allocations were low and release prices were up 25% on average. This stimulated demand for older vintages at comparatively low prices, such as 2012, 2014 and 2017, as examined in our Q1 2023 report.

Overall, climate change can create scarcity in the market, pushing the entry point into some fine wine regions higher.

The broadening fine wine market

The rarity of some wines is leading buyers to also consider alternatives from other regions, impacting the size of the market. Today there are more fine wine investment opportunities than in any other point in history.

Changing weather patterns have also led to the emergence of new wine producing regions. For instance, England is now producing award-winning sparkling wines, due to warming temperatures. The country is still a niche player in the investment market, but some brands such as Nyetimber and Gusbourne Estate are making waves.

Climate change is reshaping the fine wine market, with some of the traditional regions forced to adapt their strategies. It is more than an abstract global concern; its palpable effects are shaping the fine wine industry, from agriculture to investment.

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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Italian fine wine shows resilience amid market corrections

  • Italian fine wine has demonstrated resilience during the market’s latest corrective phase.
  • Piedmont and Tuscany have shaped the Italian fine wine market in complementary ways.
  • In the last year, Bibi Graetz Testamatta has been the best performing brand from Tuscany, up 93%, while Marchesi di Barolo Riserva has led the way in Piedmont, up 128%.

Italy has been a beacon of stability during the fine wine market’s latest corrective phase, which has seen prices fall 7.5% over the last year. The Italy 100 index has dipped just 0.4% during this time, but many of its top wine brands have continued to make considerable gains.

Italy’s stability is more than just a short-term trend; its long-term performance has been characterised by low volatility and steady returns. Its index has risen 286% in value over the last two decades, driven by growing demand for Italian fine wine, and quality improvements.

Indeed, the top wines of Piedmont and Tuscany compare favourably to Burgundy and Bordeaux in terms of critic scores, yet prices are often lower. Italy entices buyers with lower-cost access into the fine wine market, and the diversity of its offerings. On average, one can get a case of the top Super Tuscans (Tignanello, Sassicaia, Ornellaia) for £2,129; the First Growths (Mouton Rothschild, Haut-Brion and Margaux) cost more than double.

The complementary performance of Piedmont and Tuscany

Two major regions have played pivotal roles in shaping the Italian fine wine market in complementary ways: Piedmont and Tuscany.

Piedmont’s top wines, chiefly made from the native Nebbiolo grape, are produced in limited quantities, with rarity and exclusivity driving demand and prices. The dynamics behind the region’s performance evoke comparisons with Burgundy (and its signature Pinot Noir), where scarcity intensifies the allure. Historically, Piedmont has been the chief driver behind Italy’s rising prices.

Meanwhile, Tuscany has greatly contributed to cementing Italy’s place on the global fine wine stage, and its increasing market share. The brand strength of the Super Tuscans, combined with high quality, greater volumes and solid liquidity, have given the Italian market a significant boost.

The best performing brands in the last year

Piedmont

*Explore the performance of different wines on Wine Track, our comprehensive fine wine index that enables you to identify investment grade wines, spot trends and wine investment opportunities.

Marchesi di Barolo Barolo Riserva leads the way among Piedmont’s biggest risers, up an impressive 128% in the last year. However, the rest of the wines have made gains between 39% and 47%.

Tuscany

From Tuscany, Bibi Graetz Testamatta has seen the biggest rise in value in the last year, up 93%. The wine has an attractive point of entry, with an average case price of £1,530. Some of its best value vintages include 2011, 2012, 2015 and 2016. The 2021 vintage is expected to be released next month, as part of this autumn’s La Place de Bordeaux campaign.

The rest of Tuscany’s best performers have risen between 40% and 67%, with Antinori’s Guado al Tasso at the higher price end and Montevertine Rosso being the lowest priced.

The significant growth observed in individual brands from both regions accentuates Italy’s investment potential. Despite the recent bearish trend in the market, Italy has continued to deliver and attract greater demand.

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 role of wine ratings in fine wine investment

  • Wine ratings play a crucial role in wine investment, with high scores from influential critics impacting demand and market value.
  • To use ratings effectively, investors should consider both the initial score and potential for growth.
  • The Wine Track score provides a broader view of a wine’s quality across multiple vintages and publications, helping investors assess wines at a glance.

For many investors, fine wine offers a fascinating, enjoyable, and potentially profitable venture. However, the wine market is highly nuanced, requiring a keen understanding of various factors influencing wine values. One such factor, critical to successful wine investment, is the wine rating system. This score, given by wine critics to a particular bottle or vintage, can dramatically impact its market value and demand.

Wine ratings, typically on a 100-point scale, offer a quantitative measure of the wine’s quality. The ratings of influential critics such as Robert Parker, Neal Martin and Wine Spectator can have a significant impact on the market value of a wine. This is why savvy investors pay close attention to these scores, as they can quickly identify high potential investments.

The power and influence of ratings

However, it’s not enough to simply buy wines with high ratings. The rating system is far more nuanced, with the potential for dramatic shifts in a wine’s rating over time. A wine may be rated in its youth, then again as it matures. In some cases, a wine’s rating may increase as it develops, making it an excellent investment if purchased early. Conversely, a wine that doesn’t mature as expected can see its rating (and value) drop.

How critics have moved the wine market

Some historical examples illustrate the power that critics wield in the wine investment market:

  • Robert Parker and the 1982 Bordeaux vintage: Parker’s high scores for the 1982 Bordeaux wines went against the grain of other critics, and as the wines matured and proved him right, their market values soared.
  • James Suckling and Super Tuscan wines: Suckling’s high scores and positive reviews in the 1980s and 90s for these non-traditional Italian wines helped elevate their status and market prices.
  • Jancis Robinson and Austrian wines: Robinson’s praise for the quality and complexity of wines from Austria increased their international profile and market value.
  • Robert Parker and Napa Valley: Parker’s positive reviews of Napa Valley Cabernet Sauvignon and Bordeaux blends in the 1990s contributed to increased demand and higher prices for these wines.
  • Wines Spectator’s Wine of the Year: Wine Spectator, one of the most influential wine publications globally, selects its “Wine of the Year” based on quality, value, availability, and an X-factor they call “excitement.” The wine usually becomes a hot commodity in the secondary market, breaking all-time trading record within the day of the announcement, like Marques Murrieta Castillo Ygay Gran Reserva Especial 2010 in 2020.

Knowing the critics and selling wine

To use ratings effectively, investors should consider both the initial score and potential for growth. Some wines, especially those from renowned producers in prestigious regions like Bordeaux or Burgundy, are consistently well-rated and have a history of aging well. However, there are also opportunities to find “sleeper” wines – those with moderate initial ratings that improve significantly over time.

A key part of understanding and using wine ratings is understanding the critics. Each has a different palate and preference, and their ratings reflect these tastes. Robert Parker, for instance, was known for favouring bold, robust wines from Bordeaux, California, and the Rhône. However, since Parker’s retirement, the wine criticism landscape has been undergoing a gradual shift, reflecting changing consumer preferences and a growing appreciation for diversity in wine styles, such as lighter and lower-alcohol wines.

The Wine Track score – ratings at a glance

Now it is also possible to access a brand’s average score thanks to the Wine Track score. The Wine Track score provides a broader view of a wine’s quality across multiple vintages, which can be particularly useful for potential investors seeking a more comprehensive evaluation of a wine’s investment potential.

It aggregates multiple wine vintages of a wine to create a score out of 100. It unifies more than 100 wine critics’ scores from 12 global publications that use different methodologies. By providing a combined score, it helps investors assess wines on the fine wine market at a glance.

In conclusion, while wine ratings are not the sole determinant of a wine’s investment potential, they play an integral part in the wine investment strategy. With careful consideration and a well-rounded understanding of the wine market, investors can utilise these ratings to guide their purchases and optimise their portfolios.

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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Ten years on: the top-performing Bordeaux 2013 wines

Bordeaux 2013
Bordeaux 2013
  • The Bordeaux 2013 vintage saw a tepid response at release due to challenging weather conditions that impacted its quality and quantity.
  • The vintage provided a low entry point into top Bordeaux brands, and interesting investment opportunities.
  • Ten years on, some wines have risen over 200% in value, including second wines Petit Mouton and Carruades de Lafite.

As the 2013 Bordeaux vintage sees its tenth anniversary, critics are once again turning their attention to these wines. Our retrospective provides a glimpse into the market performance of the vintage, and the best-performing wines today.

Bordeaux 2013: a difficult year for winemaking

Bordeaux’s 2013 vintage was met with lukewarm reception upon release, primarily due to adverse weather conditions that took a toll on both its quality and quantity. Coming on the heels of two poorly priced campaigns did not help either.

A wet winter transitioned into an equally damp spring, delaying budburst and resulting in many grapes suffering from coulure. Unpredictable temperature fluctuations, frost, and an extraordinarily rainy May led to a disrupted flowering in June, further complicating the growing season.

July brought extreme heat, one of the hottest in over six decades, culminating in torrential rainstorms that significantly reduced yields in the Médoc and Pessac-Léognan appellations. August continued the trend with destructive hailstorms in the Entre-deux-Mers region. Consequently, growers were forced to discard damaged and unripe berries, causing further reductions in yield.

A mixed bag

Despite the less-than-ideal weather conditions, certain areas and grape varieties fared better than others. Saint-Estèphe, for instance, benefited from a drier growing season, resulting in some of the most successful wines of that year. Late-ripening varieties like Cabernet Sauvignon also made the best of the limited summer weather. However, earlier-ripening varieties like Merlot struggled due to the damp, cold start to the year.

In general, the 2013 vintage yielded smaller quantities of wine with dramatic variations in quality. The best reds were light, with lower alcohol content and a fresh fruity character, whereas the less successful examples were marked by overextraction and astringent tannins. Whites performed better overall, the best of which possessed aromatic freshness.

In terms of style, Bordeaux 2013 significantly deviates from the richer, sunnier vintages of recent years. It has produced lighter-bodied wines imbued with a tangy acidity, making them more suitable for short- to medium-term drinking rather than long-term cellaring. Many of the wines are now ready to drink.

A lower entry point into the market for Bordeaux

The inconsistency in quality led to a range of price points in the market. This presented an opportunity to acquire Bordeaux wines at lower prices than usual, especially those from estates with a proven track record of producing high-quality wines in challenging years.

This made the vintage an interesting entry point for those looking to invest in Bordeaux without the high initial price that other ‘on’ vintages command – a trend identified among buyers in Asia, and particularly for the First Growths and their second wines.

This has stimulated investment interest in the vintage, and some Bordeaux 2013 wines have seen considerable price appreciation, delivering over 200% returns in less than a decade.

A vintage for second wines

Four second wines are among the best performing Bordeaux 2013s. The second wine of Château Mouton Rothschild, Petit Mouton, leads the way with a 233% rise since release. The wine offered a low entry point into the brand at £750 per case; by comparison, this year’s 2022 vintage was released for £2,196 per 12×75.

The second wine of Château Lafite Rothschild has been the second-best performing label, up 230% in value since release.

Pavillon Rouge du Château Margaux and Le Clarence de Haut-Brion also feature among the biggest risers, with increases of 163.9% and 142.4% respectively.

Bordeaux 2013 – an unexpected opportunity

A decade on, the Bordeaux 2013 vintage has shown that even in challenging growing conditions, wines of interest and value can be produced. The vintage offered a lower entry point into Bordeaux, resulting in several significant performers. The legacy of the Bordeaux 2013 vintage may well be seen as a fascinating anomaly – an unexpected opportunity for wine collectors and investors.

 

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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Q2 2023 Fine Wine Report

Our Q2 2023 report has now been released. The report examines the macroeconomic factors affecting fine wine demand, the Bordeaux 2022 En Primeur campaign, recent winery acquisitions and other industry news.

Key findings include:

  • UK and US stocks experienced a positive upswing, but a note of caution prevails for the second half of the year.
  • Major fine wine indices drifted in Q2, partly due to stronger sterling.
  • Fine wine demand remains solid, with wealth managers and financial advisors predicting it is set to increase.
  • Bordeaux enjoyed sustained interest in Q2, due to the release of the high-quality 2022 vintage.
  • The high release prices, however, led buyers to older vintages of comparable quality and the majority of the best-performing wines in Q2 were Bordeaux.
  • Marchesi Antinori took full ownership of Napa Valley’s iconic winery Stag’s Leap, while Joseph Drouhin expanded its Burgundy vineyard holdings.
  • New World releases will likely dominate the Q3 headlines.

Click below to download your free copy of our quarterly investment report.

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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.

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

US wine investment report
  • Our special report reveals how US wealth managers and financial advisers perceive fine wine as an investment.
  • Almost all (92%) US wealth managers expect demand for fine wine to increase.
  • Fine wine is ahead of jewelry (78%) and antique furniture (78%) in joint second.

In recent years, fine wine has grown in popularity among affluent and high-net worth individuals in the US, driven by a greater recognition of the role it can play in delivering stability, attractive returns, and diversification to investment portfolios.

To date, there has been limited research into how fine wine is perceived by the key gatekeepers to sophisticated private investors, namely wealth managers and financial advisors.

Our special US report, Fine Wine: The Journey from Passion Asset to Mainstream Asset Class, seeks to bridge this gap by drawing on independent primary research among 50 US-based wealth managers and financial advisors.

Fine wine demand to increase

Our findings revealed that fine wine will attract most demand from investors over the coming year amongst all leading passion assets, with almost all (92%) of the surveyed expecting demand to increase.

This placed fine wine comfortably ahead of jewelry (78%) and antique furniture (78%) in joint second. Other well-established passion assets such as classic cars (64%) and art (54%) placed much lower in sixth and ninth place.

Fine wine’s place in a portfolio

The report found that fine wine is already featuring prominently in many wealth managers’ client portfolios. US wealth managers and advisors estimated that almost half (45%) of their high-net-worth (“HNW”) client base invest in fine wine with an average portfolio allocation of around 13%.

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.

The report further provides in-depth research on the most common reasons for US investors to consider fine wine, and catalysts for further growth.

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

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Navigating the fine wine market: insights for savvy investors

A version of this article by WineCap’s CEO Alexander Westgarth was first published in Forbes.

  • Fine wine has been traded for millennia although its popularity as an investment is more recent.
  • The fine wine market’s stability compared to stocks make it an effective volatility smoother, preserving wealth during market downturns.
  • Investors should consider factors such as illiquidity risk, storage costs, and insurance coverage, while positioning wine as a complementary asset within a diversified portfolio.

The world of fine wine has long captivated investors with its timeless allure. Wine appreciation and collection is one of the oldest practices; the ancient Greeks, Egyptians, Phoenicians and Romans were all big traders of wine. Perhaps the first evidence of wine investment in the more traditional sense can be found in the writings of Thomas Jefferson, America’s third president. In 1787, he wrote that the 1786 vintage for top Bordeaux wines cost 1800 livres per tonneau compared to 2000 livres for the older 1783.

Today, the fine wine market is gaining popularity, not just among oenophiles; investors and wealth managers are looking to reap the benefits of this diverse asset class. New participants are eager to ensure they avoid potential pitfalls and make informed investment decisions. This article provides some of the key considerations for successful wine investing, showcasing the market’s potential at a glance.

Wine as a hedging asset

When constructing a well-rounded investment portfolio, it is crucial to consider the inclusion of fine wine as a hedging asset. Fine wine has a historical track record of retaining and increasing its value, even during periods of economic recession or financial uncertainty. Recent years are a case in point. While the world grappled with pandemics, wars and inflation, fine wine enjoyed an incline. Over the last half-decade, the average bottle of fine wine has increased in value by a notable 45%, according to the Liv-ex 1000 index.

Certain wines did exceptionally well over the pandemic. The standout players were Burgundy, Champagne and Bordeaux. At the start, fine bottles of Burgundy were selling for just under £200 (May 2020). But within two and a half years, average prices soared to over £325 (September 2022)—a return of 62%.

There are several reasons why wine tends to buffer against market shocks. Firstly, as a physical asset, it is less sensitive to inflation – just like property, gold or excellent art. Secondly, the market is private. Buyers are often high net worth or ultra-high net worth individuals, so they are wealthy and passionate. Thirdly, it is a rare and depleting asset.

The scarcity factor of fine wine makes it increasingly valuable over time. As purveyors open bottles, the demand outweighs supply and prices can soar. For instance, Domaine Leroy’s Nuits-Saint-Georges’ Aux Lavieres has experienced a remarkable 353% increase in value over the past five years, driven by its scarcity.

Wine can smooth out volatility

An excellent wine must be enjoyed slowly. In the same way, the wine market tends to move at a more gentle pace too. While stocks can sky-rocket or plummet in weeks, wine movements often take months. This can add much-needed stability to investment portfolios.

Wealth managers have harnessed the volatility-smoothing properties of wine to offset the erratic performance of other assets. Even a modest allocation of up to 10% can significantly reduce overall portfolio volatility and act as a valuable tool during market downturns. When inflation rockets, it can also help to preserve some of the wealth eroded through bonds and cash-like instruments.

Liquidity, storage and insurance considerations

Potential investors should be mindful of the illiquidity risk associated with wine investments. While the wine itself is a liquid asset, the investment tends to lack immediate liquidity. Investors should carefully assess their liquidity needs before embarking on a wine investment journey. Those who might need quick access to cash may want to include some cash-like investments like T-Bills or Bank CDs in their portfolio.

A buy-and-hold strategy typically yields the best results in wine investment. Selling too early can result in missed opportunities for substantial profits, especially when considering the maturity of the vintage. While digital platforms offer relatively quicker selling options, physical auction routes may take longer but can still deliver favorable outcomes.

Investors must also factor in the costs associated with wine investments. Unlike investing in public markets, fine wine incurs additional expenses such as secure storage and temperature control. Investors may also consider insurance, particularly when transporting wines between locations. Although these costs are generally affordable, it is advisable to research storage options, seek reviews, and negotiate insurance coverage within annual fees.

In the United Kingdom, fine wine investments often benefit from exemptions from capital gains tax. This favorable tax treatment can offset storage costs multiple times over, further enhancing the investment’s attractiveness.

Investing soberly

While the potential for substantial returns in fine wine investment is evident, it is crucial to navigate the market with prudence and awareness of potential pitfalls. Investors should maintain sufficient liquidity in their portfolios to handle unforeseen emergencies and consider the long-term costs associated with wine investments.

The key to successful wine investing lies in positioning wine as a hedging asset and volatility smoother within a broader array of assets. Although an exceptional bottle of wine holds its own allure, it should not overshadow the rest of the portfolio. Wine should be viewed as a stable and valuable component, working harmoniously with other investments to help investors achieve their long-term financial goals.

With careful consideration of market dynamics, wine’s inherent hedging properties, and a prudent approach to investment, investors can embrace the timeless elegance of fine wine while capitalising on its investment potential.

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.