Is fine wine best enjoyed in a glass, or stored away as an investment? Arts & Collections asks Peter Shakeshaft of wine investment advisors Vin-X for a taste of his insider knowledge.
In these days of economic and political upheaval, it would be good to know of a reliable investment available to anyone with a little specialist knowledge. But does fine wine qualify? We asked Peter Shakeshaft, Founder and Chairman of Vin-X Limited for some expert advice.
First and most obviously, is fine wine in fact a good investment? How does it compare with more recognised alternative assets? Perhaps surprisingly, it can turn out to be a better bet than gold. “Fine wine, when treated as an ‘alternative investment’, has a reliable track record of delivering stable growth which has outperformed shares and commodities such as gold over the long term” says Peter. “Its price performance does not generally correlate with financial markets and, therefore has the ability to diversify and strengthen an investment portfolio. As an example, when looking at five year performance at the end of September 2019 the key Liv-ex 100 index had grown 31.5 percent, compared to the FTSE 100 11.9 percent, and gold 23.9 percent.”
So is familiarity with Liv-ex, the global online marketplace for the wine trade, essential for the potential investor? “A fine wine investor should certainly seek to work with a specialist fine wine investment broker or merchant who is a registered member of Liv-ex to ensure they are benefiting from market information and accessibility to their global trading platform” says Peter. “Key Liv-ex benchmarks for investors to monitor are the Liv-ex 100 and the broader Liv-ex 1000”.
Of course, most of us would need the inside knowledge of a specialist such as Vin-X to know what to go for—“As a general rule, investors should plan to hold fine wine for the long term to optimise returns, however there are instances when individual wines and market trends can deliver significant shorter term growth.”
Another incentive to invest is that fine wine is categorised as a ‘Wasting Asset’, so does not generally attract Capital Gains Tax, and if stored in a Government bonded storage facility will not incur VAT or Duty payments until removed from bond.
If the advisor understands the investor’s interest in fine wine, level of experience, and amount of capital available, they should be able to provide proper guidance—but there can be pitfalls. “It is important to remember that fine wine is unregulated and therefore protections afforded by the Financial Services Compensation Scheme do not apply” says Peter. “The Wine Investment Association (WIA) was established in 2013 to introduce self-regulation through adherence to a Code of Practice the Association established to protect investors in fine wine. Vin-X is a founding member of the WIA.”
An advisor can help with questions such as provenance, storage and insurance, and of course historical performance, regional trends and current market information. Ten years ago, 90 percent of the options available might have been chosen from the very best wines of Bordeaux—now there is a much wider choice including Burgundy, Champagne, Rhone, Italy, California, Spain and Australia, with Bordeaux representing around 60 percent of trade on Liv-ex. Still, there are only around 70 producers globally whose wines command the global profile and quality to attract investors.
Of the ‘blue chip’ investments, Bordeaux First Growth names such as Chateaux Haut Brion, Latour, Lafite Rothschild, Margaux and Mouton Rothschild still dominate, while top performing Bordeaux Right Bank wines include St Emilion’s Chateaux Ausone, Cheval Blanc, Pavie and Angelus, and Pomerol’s Le Pin and Petrus.
Record sales of single bottles of top Burgundies including Domaine de la Romanée Conti (DRC) wines, have fuelled a broadening market in the top wines of this region. At auction in October 2018 two individual bottles (75cl) of extremely rare 1945 DRC, Romanée Conti sold for US$558,000 and US$496,000. Other wines currently enjoying growth include Champagne’s rare vintages of Krug, Cristal, and Dom Perignon, Rhone’s top Guigals, Italy’s five Super Tuscans, iconic Californian cult wines including Screaming Eagle and Opus One and Australia’s Penfolds Grange.
As Peter explains, it is essential to have some insight into these values, and the significant differences between the risks of buying in bottle or en primeur (which can be likened to acquiring an investment ‘future’). “The benefits of buying wine en primeur are to guarantee supply of rare wine and ideally at the lowest possible market price, but investors should be aware that en primeur release prices have risen since 2011, so in-bottle investments can offer better value”.
With only one percent of global wine production rated as investment-grade, Peter says it’s worth investors educating themselves at wine clubs, events and vineyard visits.
So finally, when is it a good idea to drink it, rather than store it? Peter Shakeshaft has definite views. “Ultimately there is finite supply of these wines which reduces over time as they are consumed, and a growing global market for them which supports a long term growth plan. Should you decide to ‘drink your investment’, fine wine critics such as Neal Martin, Jancis Robinson, James Suckling and Robert Parker Jnr., who established the Wine Advocate, provide guides on drinking windows for optimum enjoyment!”
This feature was originally published in the latest edition of Arts & Collections, which you can read here