One of the largest misconceptions with financial speculators is that the fine wines market doesn’t have longevity as an asset class, or that some publicised figures of return are best case scenario, whereas in actuality they are strong but indicative of the market as the wines have shown this level of performance only due to the high demand and quality of the products.

 

When you take into account the quantities of wine produced by the worlds leading wineries and the demand upon them from day one by the ever growing number of buyers you can start to understand why more and more people are turning to fine wine as an alternate asset. As an example the level of interest surrounding the highly anticipated vintage due to be released by Bordeaux’s big five, the 2009 and the hype surrounding it can be used as a yard stick for future interest and consistency of buying patterns. Most critics and connoisseurs agreeing the vintage has the potential to be the best within the last century, this is already heightening its demand before its release, over a year before it is bottled.

 

 

Golden Grapes

The feeling of acceptance shown by the wider financial world has led a lot of people to ask me about the long term future of niche investment returns the fine wine market offers. Those with no previous experience in the market saying that they will have missed the boat, as the market now garners coverage on a daily basis in some of the worlds leading financial publications leaving only FTSE style blue-chip returns for first time investors looking to speculate through wine. ”

 

The fact is that the wines in question have set production quantities and once produced a classic vintage will never be bottled again. This is the simple theory that has seen wines rise in value. In addition to this very simple driving force the acceptance of wine as a powerhouse asset class has not been the sole reason for the recent media hype, this all tails from a larger audience drinking the wines in the first place.

 

This audience which consists of the new money economies that have observed for so long, Asia, Russia, and even South America came on to the scene over the course of the last decade with a large portion having massive expendable incomes, a huge passion for wine and its culture that leaves us with a consumer market that is more than double that of five or six years ago.

 

This passion mixed with the already high demand has followed on to a huge growth in both fine wine consumption world wide and in its preferential treatment from investors. The market has a history of performance that is second to none over its time on record and the current hype is only adding to the liquidity of wine as an asset.

 

The performance from the wine market during the financial meltdown has also brought to light the advantage we at Premier Red Fine Wines offer with our global positioning. We have the ideal network to ensure the strongest possible returns at the highest of international pricing for our clients.

 

The key when looking at the market from the outside perspective is not to get carried away with the romance of wine as a commodity, yes you are trading one of the most highly sought after luxury goods on the planet but take a more business like approach, look at the returns from wines benchmark index, Liv-Ex in march of 2010 alone it grow by 5.5%, the first quarter of the year we saw movement of 12%, in the past five years the return has been 166% with the FTSE 100 and S&P 500 showing comparably derisory performance.

 

The wine market will continue to receive stronger more wide spread coverage as international demand grows. This will up the investment potential but will also affect the wines availability and value. As the last few years have shown a relative niche ten years ago with high case prices of 15-20k to an area now mentioned on a daily basis as a genuine and more importantly lucrative alternative to mediocre stock and asset returns with high case prices of 40-50k a jump well above inflation. With all this in mind it would be my strong opinion that if you do not hold any wine in your current portfolio then you should be looking at an addition in the near future the market has longevity but why not get involved before the chasing pack.. Michael Graham, Senior Broker at Premier Red Fine Wine info@prfinewine.com

 

Premier Red Fine Wines - April 2010