Q4 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 Q4 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 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 +121.42% since October 2009 (annualised returns of +8.13%). 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.

This 4th Quarter overview summarises the global financial and fine wine market performances to December 2019.

2019 Market Overview

  • Cult Wines 2019 index sees a modest drop of just under 1%.
  • Cult Wines indices outperformed Liv-ex 1000 : -0.98% vs -4.2%.
  • Liv-ex Italy 100 and Champagne 50 were the only two regions that delivered positive gains for 2019.
  • Our tactical allocation and selection of wines was key in outperformance especially in Burgundy and Champagne but also in other regions.
  • Early diversification from traditional regions paid off.
  • 2020 Outlook: Strong divergence in regional performance has created buying opportunities for investors.

Quarter Four Trade Overview

Q4 has seen Liv-ex 1000 – the broadest measure of the fine wine market – drop 3.5% in aggregate. Most of the sub-indices within Liv-ex 1000 closed the year lower, with Burgundy 150 suffering the most and falling 6.6% over the last quarter of 2019. Italy also cooled from its previous 9 months’ gain, with the Italy 100 down 0.6% in November. Outside of Liv-ex 1000, the California 50 registered a 2.2% loss in Q4.

Despite the unexciting results over the last quarter, varied performance across different regions provides additional insights in the market. This presents us with potential opportunities and investment ideas as we enter 2020. For investors, the lower the correlation between region returns, the greater the benefits from diversification in a portfolio. Looking back on 2019, we find that Champagne and Rhone had the lowest correlation with the broader market index, a defensive characteristic that made them good portfolio diversifiers. Of the top-performing constituents of Champagne 50 index, Bollinger, Grande Annee 2004, Louis Roederer, Cristal 2000 and Moet & Chandon, Dom Perignon Rose 2006 delivered an average return of 43%, outperforming the other regions’ top risers.

In November, Leoville Barton 2016 was undoubtedly the most discussed and traded wine in the market, owing to the momentum generated when it was named 2019 Wine of the Year by Wine Spectator. Following the announcement, Leoville Barton 2016 saw its trading volume jump significantly on Liv-ex, with its price also rising from £710 to £1,166 (per 12). Moreover, 2009 and 2016 were the two most traded Bordeaux vintages in Q4, dominating the Bordeaux market. Burgundy has seen a gradual decrease in market share, whilst those of Champagne and Italy continued to climb. In December, Liv-ex published their Top-10 performing wines of year, dominated by the latter two regions. In particular, Giacomo Conterno, Barolo Riserva Monfortino 2002 from Italy topped the table with an impressive of 75% price gain over 2019. Last year, almost all top risers were from Burgundy. This change reflects a broadened picture of the wine market, leaving ample room for regions with increased market exposure to produce additional returns and sustained growth. Our Fine Wine Investment Outlook 2020 introduces our investment views with our adjusted tactical asset allocation reflecting those evolutions.

Quarter Four Performance

Over the course of 2019, CW Main index dropped a moderated 0.98% as most of its sub-regions experienced negative returns this year. Encouragingly, CW Champagne, CW Italy and CW Burgundy are the three sub-regional indexes ending the year on a positive note, with yearly returns of 5.4%, 3.99% and 2.75% respectively. Most wines from selected regions added into CW portfolio this year have solid fundamentals and are well positioned to perform better than the broader market over time.

Burgundy: Within CW Burgundy index, Prieure Roch, Vosne Romanee Clos Goillotte 2014 had the best performance in Q4 with a price gain of 243%. Rossignol Trapet, Chapelle Chambertin 2016 and Domaine Leroy, Vosne Romanee Genaivrieres 2014 came next and posted attractive returns of 166% and 129% over the last quarter, undoubtedly capturing investors’ attention in a slowing Burgundy market.

Champagne: Within CW’s Champagne index, Q4’s top two best performing wines are all from Moet & Chandon, with Dom Perignon 1990 and Dom Perignon Rose 2002 delivering returns of 13.6% and 9% respectively. Perrier Jouet, Belle Epoque 2008 is the third on the list, posting 8% in Q4. Looking at transaction history on Liv-ex, the rising trend of the brand is getting obvious. In 2017, Perrier Jouet, Belle Epoque 2008 traded at £950 per 6, and now the wine trades successfully at £1,560 per 6, representing an impressive 64% return in less than 2 year.

Earlier in the year, we have made meaningful changes to our asset allocation and decided to take an overweight stance on Champagne. In particular, we saw rose and grower champagne interest gradually picking up over the last 12 months thanks to increased brand awareness and improved trading activity.

Italy: The outlook for the Italy market is very optimistic, with CW’s Italy index reaching a record high earlier this year. On a regional level, Super Tuscans demonstrated their potential as portfolio diversifiers this year, with most vintages of Solaia, Tiganello and Sasscicaia returning favourably while the broader market went down. In addition to Super Tuscans, prestige producers such as Giacomo Conterno, Gaja and Bartolo Mascarello dominated our clients’ discussion about navigating through Italian investment opportunities and supported our overweight stance for Piedmont in particular.

Rhone & Rest of the World: CW’s Rhone index was down 3.8% in 2019, however, performance varies by producers. Chapoutier Ermitage Blanc Ermite, Guigal Cote Rotie Landonne and Domaine Jean Louis Chave, Hermitage are considered as the major contributors to the rising trend of Rhone. Entering 2020, the Rhone wine market looks well positioned for further growth, and the improved market exposure continues to be very supportive. CW’s Rest of the World index ended the year slightly negative at - 1.43%.

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Quarter Four Investment Overview 2019

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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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