(TEL) Why Fine Wine Outperforms 98pc of Investments

[AKR]

Why Fine Wine Outperforms 98pc of Investments
2020-06-05 10:28:29.763 GMT



(Telegraph) -- Even in times of economic turmoil, the laws of
supply and demand mean that luxury wines can bounce back far
quicker than stocks and shares or cryptocurrencies

Fine wine used to be the preserve of tweed-clad connoisseurs and
their cavernous cellars piled high with top vintages from
Bordeaux’s finest chateaux.

Not anymore. Today your average fine wine investor is just as
likely to be a budding young entrepreneur saving for the future,
a hardworking tradesman with a successful small business, or a
retiree looking to maximise that retirement pot.

Companies such as OenoFuture are making it easier than ever for
both new and experienced investors to enjoy market-beating
returns that consistently average 10pc to 11pc per annum.

“Fine wine investment companies always like to trot out the
well-worn line that investors should diversify 1pc to 10pc of
their portfolio with fine wine,” says Daniel Walker, OenoFuture’s
head of investment.

“The truth is that wine is a remarkably safe and stable
investment that is proven to outperform 98pc of other
investments. To give a quick example, Liv-Ex’s Burgundy 150,
which tracks the prices of top Burgundy wines, shot up 76.95pc
over the past five years, while the FTSE 100 fell by 14.3pc over
the same period.

“Fine wine is an accessible market open to both new and
experienced investors alike thanks to fine wine investment
companies like OenoFuture. Our investors can enter the market
with initial investments which vary from as little as £5,000 to
six or seven figures, making it truly an opportunity everyone can
benefit from.”

The current turmoil and uncertainties associated with Covid-19
have hit many investors hard. Does fine wine hold hope for those
badly affected by the crisis?

“I’ve heard countless stories of investors who’ve lost their
entire life savings over the past few months,” says Mr Walker.
“However governments decide to respond to Covid-19, there is
little doubt that quantitative easing and increased borrowing are
on the cards.”

As we have seen, both traditional stocks and shares and newer
alternatives such as cryptocurrency are inherently risky – the
value of bitcoin dropped 37pc within 24 hours in March 2020, and
Amazon lost $31bn on its valuation in 2018 after Donald Trump
criticised the company’s tax arrangements.

Fine wine quite simply plays on a different field to these types
of investments. While stocks can rise and fall for any reason,
including a simple tweet by a prominent politician, the value of
fine wine is determined by plain old supply and demand.

Demand for fine wine around the globe is rising, especially as
more developing countries develop a taste for luxury products.

At the same time, supply remains extremely limited because of the
artisanal nature of fine wine production. And since wine is made
to be consumed, every time a bottle of rare and sought-after
wine, such as Domaine de la Romanée-Conti La Tache from Burgundy,
is drunk, the price of the remaining bottles will increase.

This simplicity is why fine wine tends to hold its value and
bounce back quickly after economic downturns. During the 2008
recession, the Liv-Ex 100 index, which tracks the prices of the
most sought-after wines on the secondary market, dipped by 20pc –
yet took less than two years to return to pre-recession levels.
In contrast, the FTSE 100 dipped by 47.82pc and took more than
five years to return to pre-2008 levels.

So how exactly does one invest in fine wine? Mr Walker recommends
seeking out a reputable wine investment company with a proven
track record in the market.

“I always recommend that potential investors do their research
before jumping into the market,” he says. “If it looks too good
to be true, it probably is. Succeeding in the fine wine market
depends on selecting the right bottles to invest in and being
absolutely sure of their provenance.

“At OenoFuture we have a dedicated fine wine team, which includes
Master of Wine Justin Knock and Italian wine expert Daniel
Carnio, whose insider knowledge allows us to secure rare and
sought-after wines direct from the wineries themselves.

“At OenoFuture our ethos is centred on making money with our
clients, not from our clients. Our company has been named
Europe’s Top Fine Wine Investment Firm two years in a row at the
Global Banking & Finance Awards and we’ve made it our mission to
make investing in wine as easy and as profitable as possible.

“In seasons of intense fragility, wine offers welcome stability –
which is why we’re seeing record numbers of first-time and
seasoned investors turning to us for help.”

Unlike other fine wine investment companies, OenoFuture’s unique
business model offers investors the ability to sell their wines
directly to restaurants and private collectors. Rare bottles are
sold to London’s on-trade through the OenoTrade arm of the
business, and the company is opening OenoHouse in the heart of
the City, where visitors will be able to sample the world’s
finest wines and purchase bottles.

“This closed loop makes it even easier for investors to exit the
market when the time is right, ensuring that even armchair
investors can enjoy serious returns,” says Mr Walker.

“For new or experienced investors buffeted by current market
uncertainties, fine wine can offer a very simple and profitable
solution. Napoleon might well have been talking about wine
investment with those famous words, ‘In victory you deserve it.
In defeat you need it.’”

[DavidG]

Seller of wine investment fund says it’s a good investment? Shocking!

[marcs]

The idea that wine will have investment value can be a major buying enabler, but IMO is wrong 95% of the time. In truth, though, I have reached the level of wine ownership where I de facto have to view my wine as a financial asset, in the sense that it is something I own and could sell if I really needed the money. That was part of my decision to insure. But I believe that the transaction costs involved with selling are just too great to really make it a reasonable investment class for most people. I guess the pitch on wine investment funds is that transaction costs are greatly reduced, but it feels like it is extremely underregulated and you could just get ripped off.

[AKR]

You can observe that UK rules on pitching investments are quite a bit different than US ones. I don't think you'd see such a naked and one sided appeal in the NYT or WSJ.

I posted this for the entertainment value, not because it deserves promotion!

Making money in wine is hard, and I suspect the few who do, cherry pick a few trades, ignoring the vast majority of swill that is drunk up, with no financial return.

[marcs]

If I could get back say 80-85% of what I paid if I had to sell my cellar then I'd be satisfied with that as it would provide a meaningful financial asset in case I ever needed it and I am satisfied to "lose" money for the pleasure of the hobby. Obviously for the collecting I did over say 2000-2012 I could get back that and more, not so sure about purchases these days as it seems to me prices are inflated especially in Burgundy.

[Blanquito]

I have sold off decent quantities of wine 7-8 times through the years, and it is a PITA and a big time sink.

Everything I sold was either wine I didn't like anymore (the largest category by far of what I've sold), had way too much of, or had gone up so much in value I decided to cash in (See: Gonon St. Joseph and Duhart Milon during the Lafitte craze).

I've managed to either break-even after all transaction costs (not easy to do once you factor in shipping costs both ways and seller's premiums) or even make a tidy sum on some hot wines. But in general, I never made any systematic profit.

[marcs]

Even though it's very difficult to make money it's still a decent downside hedge and means that you aren't just setting your money on fire when you buy wine. It's not a rational retirement investment compared to securities, etc. but it's still an asset.

I know some good places that will pay basically 70% of the Winesearcher low with few questions asked for wine that is in good physical shape and well stored, PITA can be low with places like that and just telling your storage locations to ship.

[AKR]

[DavidG]

Sure it's an asset and worth something if you have to sell or your heirs aren't into wine and sell it after you're gone. I can see including it in net worth but would never consider wine as part of an investment or savings strategy for retirement, college costs, home down payment, etc.

I've sent substantial amounts to auction 3 times. First was when I fell out of love with Napa cults. Second time was when the China market went crazy over first growth's. Gave up wine I would have loved to drink but couldn't justify keeping and opening them. Last time was when we downsized and I sold the least-loved half of the cellar. Would have loved drinking them too but it was easier to let them go than the bottles I kept. I made a decent profit on the first two and was within 1% of breaking even on the last.

[stefan]

Ian, isn't it much easier in the UK than in the USA to invest in wine? You put it in bond, so no VAT and provenance is assured when you sell. In the USA, capital gains tax on wine is 25% when it is 15% on financials. Is there different treatment in the UK for taxing gains from the sale of wine and from the sale of stock?