Q1 2020 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 Q1 2020 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 our experience in the fine wine market, statistical and quantitative research and algorithm based modelling, our unique approach has driven our Assets Under Management (AUM) to £125 million. Our own CW index returned +120.63% since October 2009 (annualised returns of +7.89%). 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 1st Quarter overview summarises the global financial and fine wine market performances to March 2020.

2020 Market Overview

  • Liv-ex 100 declined -1.06% overall, while Liv-ex 1000 – the broadest measure of the fine wine market – dropped by -2.7% in Q1
  • Italy 100 (+0.6%) is the only region that finished the quarter in a positive territory
  • Burgundy 150 and Bordeaux 500 declined by -4% and -2.7% respectively
  • Fine Wine 50 – which tracks First Growth in Bordeaux - retreated further with a quarterly loss of -4.1%, while California 50 also declined.

Quarter One Market Turmoil

In the face of challenges arising from the Covid-19 ahead of us, resilience has now become a crucial necessity. Every industry needs to respond to the crisis – including wine.

As the Coronavirus has continued to spread rapidly, the full scale of the risk to the global economy has hit markets with rare violence: the speed of the sell-off in equities and “risky” asset classes has only been matched by the rise in price of safe haven assets such as US government bonds or Gold.

As always in a market crisis, the unknown factors and panic lead to asset price dislocation as well as extreme volatility, which in turn lead to irrational behaviour and lack of long-term perspective. Wine, as an asset class, has not experienced the turmoil we have witnessed in the last three weeks, and has so far played the same role it did during the last financial crisis in 2008, so far showing resilience and relative stability. The last few weeks have highlighted and reminded us that investment returns are intrinsically linked to risk and that, when volatility increases, it pays to have a diversified portfolio to cushion against violent market movements. In this context as a leading wine investment company, we continue to advocate the benefits of wine for diversification in protecting investors’ portfolio value.

Quarter One Performance

In the first quarter of the year, CW’s main index was marginally down at -0.36%. Our Bordeaux index fell -1.1% as a few prominent chateaux have struggled of late. Investors’ attention has gradually shifted to wine regions such as Italy, Champagne and Rhone that appeared undervalued. That said, of the First Growths of Bordeaux, a few older vintages of Château Margaux performed particularly well in Q1. Also, names such as Monbousquet and Petrus from the right bank continued to do well.

CW’s Burgundy index* closed the quarter almost flat, contrasting with a more acute fall in Liv-ex’s Burgundy 150 index. *Please note that CW’s Burgundy index has a diverse base containing more than 500 wines in the index, in comparison to the more concentrated Liv-ex Burgundy 150 index, which carries 40% in DRC.

The outlook for the Italy market remains highly optimistic, with Italy becoming the best-performing region and the CW Italy index returning 2.6% in Q1. On a regional level, Super Tuscans demonstrated its ability to generate return in challenging period, with Ornellaia 2000, Tiganello 2007 and Sasscicaia 2008 featured among the Top-10 best performing wines of the region in Q1. In addition to Super Tuscans, iconic producers such as Giacomo Conterno, Gaja and Biondi Santi continued to capture much attention among investors, with consistent performance across vintages.

Since 2014 our own CW Piedmont Index is up 112% whilst the wider Liv-ex Italy 100 index is up 39% over the same period. A few prominent producers have now released their Brunello 2015 and Barolo 2016. In short, the 2015 is the best vintage for Brunello since the prodigious 2010s, whilst 2016 has been described as a truly perfect vintage for Barolos. We believe that Italian wines continue to offer the most economical entry pointf or fine red wine investors.

Despite the relatively muted performance of CW’s Champagne index this quarter, a few grower champagnes have managed to steadily increase on both prices and popularity. For example, a special mention must go to Jacques Selosse, whose Lieux-Dits Collection Assortment appreciated in value by 21 % over the last month. Within CW’s Champagne index, Gosset, Grand Millesime 2006 and Salon, Le Mesnil 1997 were among the top performing wines, returning 29% and 21% respectively in Q1.

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Quarter One Investment Overview 2020

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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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