Wine has been collected since the late 17th century by everyone from Thomas Jefferson to Andrew Lloyd Webber. Not much has changed either, except the idea of wine as an investment – any suggestion that wine might be sold on for a profit, effectively creating a wine stock market, would in days gone by have made any gentleman choke on his venison. But the most important considerations for buying wine are the same as ever, namely to know what to buy, who to buy it from, when to buy it, and how much to pay for it.
The advantages of investing in wine are fairly straightforward. Wine is an easily transferable asset with an established and thriving broking and auction market. There are no limits to investing; you can put in £250 or £250,000. However for anyone wanting a serious return, £5000 would be about the minimum realistic starting point. The expected average return on an investment portfolio is in the region of 15% per annum over a five year period.
To make the most of your money, you should plan for the medium to long term. Short term investing can bring healthy profits – for example, the price of Ch. Montrose 2003 astonishingly went up by 50% in a single day – but of course it is a much more risky business. A good wine from a good vintage can present market conditions, experience an increase in price of between 50-100% before it reaches full financial and physical maturity. The crème de la crème from any top vintage may increase by considerably more than this. Indeed, Chateau Latour, from Bordeaux, which sold in 1990 at £450 a case would now fetch around £3,600, an increase of 800%.
The fluctuation of wine prices, whether for an individual wine, or a whole vintage from a given region, is highly capricious and can be extremely sudden. This can be as a result of a complimentary write-up from a leading wine journalist like Robert Parker, whose 100-point system of marking wines has a huge influence on the fine wine market. As one observer once noted, “When Robert Parker spits, the world listens”. Historically the wines that Robert Parker gives high scores to, particularly scores over 90 points, tend to be the wines that show the biggest increase in value. Parker recently re-evaluated 2001 Ch. Ausone; the result was that prices rose from £1350 to £2500 in two weeks.
The most obvious form of investment is buying ‘en primeur’ or ‘wine futures’, as they are sometimes known. This involves buying the wine in the summer after the harvest but not actually receiving it for another 18 months, when the wine is bottled and released for general sale. While no investment is cast iron, the prices almost always increase over this period. But this is only the beginning of the upward price curve of fine wine. The curve is probably at its steepest over the first five years of a wine’s life, and for the investor this is the most propitious time to buy.
Red Bordeaux is still the best investment bet, and the adage of buying the best wines from the best vintages is still a reliable one. The choice of fine wines to invest in has increased greatly in recent years. Today, Burgundy and the Rhône Valley, along with Italy, Spain and California all contain wines that can fetch prices as high as the top Bordeaux. But Bordeaux is still by far the most important, and most reliable, area in the market.
Apart from blips in the early 1990s and at the end of 1997, prices for fine wines have risen astronomically over the last twenty years, and the wine investment market is currently in rude health. Plus, of course, it is well worth remembering that wines do not incur capital gains tax, since they are classed as ‘wasting assets’, so even in a worst case scenario you can drink your investment, which is far preferable to dining on a share certificate.
Ten tips to investing in Fine Wine
In-Bond wines have to be stored in a Bonded warehouse. These are professional cellarers and the best place for your wine. A wine stored in non-cellar conditions will not be as valuable as the same wine stored professionally. Wine stored in bond can also be easily transferred when you wish to sell. Some merchants, like Berry Bros & Rudd, have their own facilities, while others will advise you of the best option.
Simon Berry is Chairman of Berry Brothers and Rudd
www.bbr.com
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