Why invest in wine?
With an extended period of compound annual growth rates in the region of 10-20%, fine wine possesses a remarkable track record as an investment.
While fine wine investment is no new phenomenon, today market liquidity and price transparency have evolved to the point where investors of all levels can profit from this expanding market.
Whilst traditional markets have been static or seen losses over the last five years, investors in fine wine have seen yearly double-digit returns over the past five years. Wine as an investment has traditionally been associated with low levels of risk and stable returns thanks to its unique characteristics as an asset.
Less than 1% of all wine produced worldwide may be considered investment grade, with the market traditionally preoccupied by the prestigious chateaux of Bordeaux. The finite quantities produced, ever decreasing through consumption generally ensure predictable growth in the long-term with a perfectly inverse supply curve. Fine wine is a tangible asset whose prestige and desirability increases with its value and so may be understood as a Veblen good.
The market for investment wine has shown a steady increase over the last five years, with the emergence of China as leading economic superpower further fuelling its expansion. Emerging markets across Asia, as well as the growth of the BRIC economies is exponentially increasing both demand and competition for a finite supply of fine wine. The delicate balance of managing supply and demand has probably never been more acute in the entire history of fine wine investment trade.
5 reasons to invest in wine now:
- ‘Safe Haven’- Fine wine offers a greater degree of stability than traditional markets and its historically negligible correlation with traditional markets makes it a crucial buffer, diversifying and securing your investment portfolio.
- Reliable returns- Fine wine has consistently offered investors double-digit returns year-on-year, with the market assessed as growing £3bn per annum. Demand from emerging markets is also set to ensure continued significant price appreciation.
- Past performance- As an asset class, fine wine has outperformed more established commodities including gold, equities and property.
- Positive outlook- Chinese demand, having already increased 30-40% in the last two years, is forecast to grow further, with a further 54.25% growth in Chinese and HK wine consumption forecast for 2015. Globally, the global consumption growth rate is expected to be 6.17% over the next five years (IWSR research)
- Golden moment- Demand for investment wine set to increase exponentially, economic forecasts for sluggish growth and high inflation over the next decade, recent market readjustment leaving many previously stratospherically priced wines looking undervalued... there simply has never been a better time to take advantage of the opportunities in fine wine investment.