Q3 2019 Investment Overview

Cult Wines Financial Overview and Quarterly Performance Summary

•  Global Markets Overview
•  Fine Wine Market Overview
•  Trade Overview
•  Cult Wines Performance
•  Market Outlook

 

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Cult Wines Q3 2019 Performance Introduction

Portfolio based investment grade wine is one of the most established alternative assets available to investors looking for tax-efficient, asset backed diversification and capital growth opportunities. Over 12 years, Cult Wines has become the global leader in in wine asset management, providing analytically based, fine wine investment advice. Combining over 150-man years’ experience in the fine wine market, historical research and algorithm based modelling, our unique approach has driven our Assets Under Management (AUM) to £120 million. Our own CW index returned +6.26% in 2018 and +125.74% over 10 years (annualised returns of +8.56%). With low interest rates, inflation concerns, low returns from traditional financial assets and an uncertain economic outlook, many investors are looking at ways to enhance their portfolio returns, diversify exposure and generate consistent capital appreciation.

The 3rd Quarter overview summarises the global financial and fine wine market performances to September 2019.

Quarter Three Market Overview

  • Burgundy 150 had the best quarter this year by delivering a solid 4.3% gain.
  • Italy 100 and Champagne 50 finished the quarter in positive territory.
  • Rest of the World 50 extended its gain in Q2, rising 1.4%.
  • Rhone 100 gave back some of last quarter’s strong gains.
  • Fine Wine 50 index, which tracks performance of Bordeaux’s First growth, marginally rose 0.4%, while the broader Bordeaux 500 closed the quarter 0.6% weaker.

Quarter Three Trade Overview

In July, Liv-ex launched its 2019 classification, which ranks the wines of the world by their average trade price on Liv-ex – the global marketplace for the wine trade. Entry into the classification is based on a wine’s reputation and transactional activity on the trade platform. This year, wines from nine countries qualified for the classification, which includes Argentina, Australia, Chile, France, Germany, Italy, Portugal, Spain and the US. To make sense of the diversification trend in the wine market, only six countries were included in the classification in 2017. The increased number of qualified countries suggests that the fine wine market has become more receptive to investors’ need for regional diversification and change in consumer taste.

Among the 1st tier, 77 wines qualified for the classification 2019, compared to 31 in 2017. Of these, 14 come from Bordeaux, while Burgundy contributes almost two-thirds in number of wines listed on the ranking. DRC, Romanee Conti, with no doubt, topped the first tier within Burgundy wines. Interestingly, Domaine Leroy also made a strong show with two wines – namely Domaine Leroy, Musigny and Domaine Leroy, Latricieres Chambertin - adding to the very top of first tier this year. Elsewhere in Europe, Italy contributed three wines in the first tier, with Bruno Giacosa Barolo Vigna Rocche Riserva (Red Label) and Biondi Santi Brunello Montacino Riserva being new entrants this year. The position of Masseto remained unchanged among the first tier.

Over the course of Q3, Liv-ex 1000 – the broadest measure of the fine wine market - has delivered a positive return of 1.4%, extending its previous three-month gain but at a faster pace. Encouragingly, Liv-ex’s Burgundy 150 and Champagne 50 reversed their previous months’ losses and made impressive returns of 4.2% and 2.1% respectively in Q3. Moreover, Italy, a wine region that has long been considered as undervalued, has recently proven its return potential, with the benchmark index Italy 100 returning another 2.7% in Q3. Outside the Liv-ex 1000 index, the newly launched California 50 registered a gain of 3.9% this quarter.

For investors, Italy has had a strong year so far with encouraging price performance and improved brand awareness. The traditional view is that Italian wines tend to rise slowly and steadily over time, with only a few famous names capturing the stellar performance in terms of the price.

Quarter Three Performance

After a difficult summer for Burgundy, wine investors returned from their holidays in a cheerful mood and drove Burgundy wine prices higher in September, taking the CW Burgundy index 2.4% up for the quarter and 4.8% year-to-date as of 2019.

Burgundy is often considered by many wine investors as a rare-in-nature value asset compared to wines from other regions. In the past few months, there have been concerns that a price bubble was building in Burgundy and that the market had peaked. The Liv-ex’s Burgundy 150 index had declined 6.36% in the first half of the year, with some highly respected wine producer’s flagship wines dropping in value. However, the Liv-ex Burgundy index is highly concentrated in a few names.

Encouragingly, the CW’s Burgundy index, which is more diversified, delivered positive returns for our clients during the same period. CW’s outperformance is driven by regional diversification and vintage selection. Entering the fourth quarter of the year, a few top Burgundy wines have seen their prices recovered as concerns eased. Also, it is worth noting that performance still varies between producers.

CW has seen its trading activity broaden at a faster pace in the third quarter of 2019. In particular, activity was strong on Italy. The CW Italy index closed the quarter on a positive note, delivering return of 2.5%. Super Tuscans remain popular among investors and wine collectors, with Sassicaia, Masseto and Tignanello all looking strong on the secondary market.

Away from Super Tuscans, the great names of Brunello Montalcino, Barolo and Barbaresco continue to do well. Of these sub-regions, Casanova di Neri, Tenuta Nuova 2008, Biondi Santi 2016 and Bruno Giacosa, Barbaresco Asili Riserva (Red Label) 2011 were among Q3’s top performing wines in Italy.

The CW ROW index, which captures the price performance of wines from Spain, Chile, Rhone and USA, continued to deliver consistent returns this quarter, extending its previous nine-month gain. Of the CW’s ROW index constituents, Vega Sicilia, Unico from Spain and Penfolds from Australia are the names to watch, with a few selected vintages of these respectable producers performing well in Q3. Within CW ROW index, US in particular was up 0.8%, and the major contributors to this quarter’s positive performance were Promontory, Cardinale and Verite Joie.

Within CW Champagne index, Delamotte, Blanc De Blancs 2008, Taittinger, Comtes Champagne 1999, and Bollinger, Grande Annee 2008 were among the top performing wines for the quarter, delivering consistent on-average returns of 25% for investors. As one of CW’s best performing sub-regions, CW’s Champagne index delivered 2.5% in Q3, next only to CW Burgundy and CW Italy. Increased trading activity of the region has also helped lift the broader market up for the year, according to Liv-ex.

With increased recognition of new territories and greater brand awareness, investors have gradually shifted their focus to US and some emerging regions of the wine market, Chile and Australia in particular, global demand for wines from these regions rose significantly in recent years. From our research, we expect the global expansion of the fine wine investment market to continue in the fourth quarter in 2019, with investors’ exposure of distinct wines from US and emerging wine markets increasing to an unprecedented level.

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Quarter Three Investment Overview 2019

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Quarter Two Investment Overview 2019

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Quarter One Investment Overview 2019

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Quarter Four Investment Overview 2018

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Quarter Three Investment Overview 2018

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Quarter Two Investment Overview 2018

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Quarter One Investment Overview 2018

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