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Thursday 4 December 2008

Opportunities for vintage growth

Christopher Silvester says you don’t have to be rich to invest in fine wine, and the rewards can be handsome

Bordeaux Index (www.bordeauxindex.com) was founded in 1997 by Gary Boom. ‘Our client base draws very heavily from the City,’ says head of investment Geraint Carter, ‘so our investors are accustomed to analysing markets. We monitor portfolios on an on-going basis and we have a quarterly dialogue with the investor, in which we take a view as to where we’re going to see future growth or when to realise some of the profits.’

Each of these three companies charges differently for portfolio management. Magnum forgoes any management charge, but charges for storage and insurance and takes a 5 per cent commission on sales. Premier Cru levies an annual management charge of 1.5 per cent of portfolio value starting on the first anniversary of purchase, but that is all. Bordeaux Index makes no charges, but takes its profit from its bid-offer spread (typically 15 per cent) when you sell. Wines are stored in bond, in clients’ names, either at Octavian in Wiltshire or through London City Bond.

Of the three wine investment funds, the Vintage Wine Fund, founded in 2002, may be out of the league of most readers since its minimum subscription is E250,000. But the Wine Investment Fund (www.wineinvestmentfund.com), founded in 2003, requires a minimum investment of £10,000, while the Fine Wine Fund (www.thefinewinefund.com), launched in 2006, sets the threshold at £50,000. Each uses a slight variation on the standard ‘two and twenty’ charging structure applied by hedge funds (2 per cent management fee and 20 per cent performance fee). ‘Our objective is to double your money net of fees,’ says Andrew della Casa of the Wine Investment Fund. ‘In order to achieve this we have to generate returns of 1.4 per cent per month. Since the inception of the fund in 2003, we have generated returns of about 2.5 per cent per month.’

Alan Rayne and the Goldings are former financial advisers by profession, while the principals of the wine investment funds have backgrounds in accountancy, law and fund management. Will Beck of the Fine Wine Fund, a former equity investment analyst with several years’ experience in the Far East, has a bullish long-term view of the market. ‘We see ever-increasing liquidity and we see wine becoming more and more of an independent asset class. That’s apart from the supply-side economics of wine: that it is finite in every vintage and decreases over time, giving rise to scarcity value.’

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