Fine wine investments have become a global phenomenon. Shrewd investors seeking more safety than stocks and commodities coupled with higher profits than their low yielding bonds and banks have finally discovered the highly lucrative and profitable fine wine market.
Some of the most renowned and expensive wines in the world, such as the Chateau Lafite Rothschild for example, started turning investors heads as the En-Primeur (meaning the wine was not bottled at that stage) 2008 vintage increased in price by almost 150 percent throughout 2009. Such astonishing returns in such short time are simply not possible in any other market, especially with such a low level of risk.
However, not all stocks increase by such staggering levels, but only a distinct selection of the world’s finest and most luxurious wines. Most importantly, it is a sound financial investment and investors cannot lose their money as it is a tangible asset which can be sold at any time in the global wine market.
These high worth luxury wines are valuable tangible assets in a highly liquid market, and the importance of stock selection remains crucial. Maximum returns can only be achieved by sourcing the right wine at the right time (and the right price) and similarly, knowing exactly when to sell to optimise profits.
The reason for the current explosion in popularity and the rising prices of fine wine is simple economics; basic supply and demand. The ever-increasing global demand for such high end fine wines (nowadays also called blue-chip wines) and the very limited supply thereof, make these wines very rare and difficult to obtain; therefore the need and requirement for professional advice and market reach/scope. It is important to point out that the most expensive and prestigious Bordeaux Chateaux in the world only produce a very limited amount of their wines each year. That is because French law strictly regulates and controls their output, which means that they are not allowed to produce more than their given allocation; hence the rarity factor and a reason why these luxury products have become so desirable for the richest people in the world.
Imagine there are only a certain number of bottles of a certain blue-chip wine. Someone, somewhere will open the bottle and enjoy it, meaning that the number of available bottles of that particular wine and vintage will decrease. As a consequence, the price for that particular wine can only increase; especially if it is a good vintage and has been scored and graded accordingly.
For some investors, fine wines have literally become a rescue investment. Even conservative investors who don’t like to take too much of a risk have been astonished with the returns achievable through intelligent and careful fine wine investing.
Moreover, we always recommend that our investors dedicate a part of their financial portfolio into fine wine. Shrewd investors know that diversification is key and the idea of not putting all your eggs in one basket has been fundamental to successfully investing your own money. Numbers and facts speak for themselves and all data and past performance history on fine wine investments can be traced and verified; that is why we recommend that our investors do some of their own research into the market, to get a comfortable feel for the industry. Furthermore, most investors have come back for more once it became clear what kind of lucrative returns are achievable in the fine wine investment market.
Moreover, we always recommend that our investors dedicate a part of their financial portfolio into fine wine. Shrewd investors know that diversification is key and the idea of not putting all your eggs in one basket has been fundamental to successfully investing your own money. Numbers and facts speak for themselves and all data and past performance history on fine wine investments can be traced and verified; that is why we recommend that our investors do some of their own research into the market, to get a comfortable feel for the industry. Furthermore, most investors have come back for more once it became clear what kind of lucrative returns are achievable in the fine wine investment market.
However, it is also very important to point out that fine wines are usually a medium to long term investment. A minimum of 2-3 years must be anticipated in order to achieve the highest possible returns, which does not seem to be an issue, especially for HNI’s. When trying this market with the minimum required investment capital, most investors tend to stock up again during their initial investment term when realizing how their wine portfolios are growing in value.
There are also opportunities for short-term gains in the Bordeaux Futures market (En-Primeur), but those are obviously coupled with higher risk and for our more speculative clients.
Robin Khanna is managing director at Bordeaux Traders, a fine wine investment brokerage house.
