7
INTRODUCTION
With figures from International Wine
& Spirit Research (IWSR), a London-
based drinks research group, estimating
that in 2013, 3.2 billion cases or 38.4
billion bottles of wine were produced
1
,
you could be forgiven for thinking
that the only money to be made from
wine is in mass production and mass
sales – a market not easily accessible
to smaller, generalist investors.
However, global demand for fine wine
has also increased significantly over
the past few decades – and fine wine
boasts one of the best performing, if
extremely specialised, asset classes
of the last 20 years; the increasing
premiums attributed to some bottles
are evidenced by the most expensive
lot of wine ever sold going under the
hammer in October 2014 at a Sotheby’s
auction in Hong Kong where 114 bottles
of Romanée-Conti Burgundy went for
£1,035,000 – around £9,800 a bottle
2
.
As a result, some wines are no
longer just an object of enjoyment
– they are now considered a serious
investment commodity, although
it should be noted that only a tiny
fraction of the world’s wines increase
in financial value over time
3
.
In this report, ‘fine wine’ refers to
wines that are actively traded on the
secondary market, are internationally
recognised and have the ability to
improve (and gain value) in bottle
4
.
Those valuable vintages which have
previously been seen as the preserve
of affluent collectors and connoisseurs
are now available to a much wider
section of interested parties, whose
enthusiasm is driven less by taste and
bouquet and more by potentially strong
capital appreciation and returns based
on investments from £5000 or less.
This report intends to provide advisers,
professional intermediaries, finance
professionals and sophisticated
investors with an insight into the
intricacies and opportunities of the
fine wine investment sector. It will take
into account the prospective risks,
mitigations and benefits of such a
unique asset class, which sits within
the luxury, passion asset market and
unites collectors and commerce,
whilst offering the very real possibility
of capital gains tax exemption.
We will offer some history and
background to the sector, as well as
the latest market activity. We will also
consider the drivers for supply (or more
accurately, undersupply), of the most
profitable wines, and demand, including
the legal limitations on production, the
forces of nature, the relentless pursuit
of quality and critical judgement, all
of which are very largely uncorrelated
to traditional financial markets and
instruments. In addition, we will review
how the asset’s consumable nature,
and the growing interest in areas of
new wealth impact the investment
case, as well as the fact that fine wine
matures with age, thus giving it a
growing worth and making it a very
attractive store of accumulating wealth.
That said, the connoisseurs do have an
important resource in this distinctive
asset class – expertise: given the
abundance of wine available and
that the fine wine investment market
deals with only a tiny proportion
(less than 0.1%) of the world’s wine
5
,
choosing the optimum route to
gain exposure to the right stock,
utilising specialist knowledge, is
vital. Consequently, this report also
looks at how consumers can invest.
So, our intention is to leave readers
with an awareness of the benefits
of wine as a diversification tool,
the different ways to invest and an
understanding of the key considerations
when investing in these assets,
including how to mitigate against the
risks by working through reputable
dealers, brokers and providers.
“The funny thing
is, wine is turning
out to be a great
investment. I
couldn’t believe
what happened
with the value of
my wine futures.
I pinched myself
and asked, ‘Did
I just make more
money on wine
barrel futures
than I did on the
stock market?”
Suze Orman,
Financial Advisor and CNBC Presenter
