Portfolio Management

There are really two principal ways to invest in fine wine: wine investment funds and the construction of private wine investment portfolios.

At Cult Wines we offer a leading portfolio management service that allows our clients, no matter what their level of knowledge in fine wine, to profit from the burgeoning global fine wine investment market.

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Portfolio Management Account

Cult Wines flagship investment management service is our Portfolio Management Account, whereby the minimum initial capital investment is £25,000, fully customisable to your requirements.

For those looking to access the market at a smaller capital outlay, we have an execution only account model whereby you can invest either £10,000 or £20,000.

 

Models

 

Investment Objective & Policy

Objective: Cult Wines’ investment objective is to achieve long-term capital appreciation through active management involving the buying, holding and selling of wines, whilst respecting the parameters set in our Investment Policy.

Investment Policy: Cult Wines exclusively invest in wines that respect our strict investing criteria and have potential for appreciation in value. We maintain a high level of diversification across regions, producers and vintages. Cult Wines applies a top down approach to define the optimal allocation (Strategic Allocation) in regions and vintages to the portfolio.

This is coupled with thorough quantitative analysis & research to select wines and producers that have the best relative value and growth prospects. Over the last 10 years we have developed proprietary statistical and probability models to identify those specific wines that deliver superior returns whilst respecting our strict risk parameters for investment. (Tactical Allocation).

The portfolio of wines is actively managed to maximise risk/reward and is rebalanced on a regular basis to maintain risk parameters, optimise allocation and meet our return objectives.

This process and framework is reviewed and validated by our Investment Committee.

Cult Wines’ Investment Committee combines the experience and expertise of the most senior members of the Management Team and the departments of Research, Buying & Trading. The Investment Committee is responsible for the Investment Policy: it defines the Investment Strategy and set the risk parameters. The investment committee meets quarterly to review the Investment Strategy and performance of our client portfolios and decides adjustments to allocation and specific underlying investments.

 

What does our Portfolio Management Service Include?

Process

Cult Wines flagship investment service is an end-to-end portfolio management service which covers all aspects of managing a collection of wine for capital appreciation.

Tailored Investment Strategy: Our team of portfolio managers will create a bespoke portfolio of wines tailored to your individual investment objectives, within the context of the investment policy set-out by the investment committee. Depending on your risk tolerance, target investment term and capital investment, we will build you a wine portfolio to meet your objectives. 

Storage: Investors’ wines will be stored at our brand-new storage facility in partnership with the London City Bond (LCB) network. Located in Melksham (Wiltshire), the 24,000 sq. ft. warehouse will allow all private client reserves to be stored in isolation from other trading accounts.

Insurance: Cult Wines storage facility has a comprehensive insurance policy with Marsh to fully cover the contents of the warehouse against all risks of physical loss or damage. Details of which can be provided upon request.

Ownership: Our investors feel security at all times through title of ownership of the wines. All wines are placed in individual customer sub-accounts at the professional warehouse facility. Investors own individual cases and these are identified using HMRC-recognised sub-account codes. These codes identify the beneficial owner of the stock and ring-fence stock to protect against any third-party risks, including the unlikely instance that Cult Wines ceased trading. (Further info is included within the terms and conditions, SLA Appendix 1 – available upon request). All of the above information can be independently verified by London City Bond at any time by the client. Personal visits and inspection of stocks can be arranged at your convenience.

On-going Active Management: Our flagship investment service has eliminated the friction costs involved with trading wines on your account. By trading wines at 0% fees, this allows our team of portfolio managers to actively manage your investment enhancing your performance. This allows the portfolio manager to adjust your exposure and reduce risk, in line with the tactical allocation set out by the Investment Committee.

Online Management: Clients benefit from the ability to access and view their wine portfolio online or by mobile, tracking its growth whilst viewing live valuations and reading the latest market reports.

0% Liquidation Fees upon Exit: We will undertake the eventual liquidation of your assets when you decide to divest, not charging any fees for this service, ensuring you maximise the return on your investment.

 

Frequently Asked Questions

 

Will I have a dedicated portfolio manager?

Each of our portfolio management account clients is assigned their own dedicated portfolio manager who will manage your portfolio and thus be able to construct a tailored investment strategy. You can learn more about the Cult Wines team here.

Portfolio Manager’s work within the investment objective and policy framework set-out by the Investment Committee. As an investor you can be assured whichever Portfolio Manager is assigned to your account, your investment will be managed as effectively as any other.

 

What level of contact can I expect from my portfolio manager?

We know how much our clients value maintaining open and transparent investor-manager relationships. Therefore, we keep all our clients regularly updated, at your discretion. We would recommend a regular review of your investment with your Portfolio Manager either quarterly, bi-annually or annually.

Our Portfolio Management Service is advisory, and not discretionary. This means you portfolio manager will be required to contact you every time they wish to undertake an action on your account.

Clients also benefit from the ability to access and view their wine portfolio online. Through our online portal you can request a review, place a sale order or read the latest market reports.

 

What is the minimum investment?

For our Portfolio Management Service the minimum investment is £25,000. If you would like to start an investment for a smaller initial capital outlay, you can invest either £10,000 or £20,000 through our execution only account.

 

What wines will I be investing in?

Your dedicated portfolio manager will discuss your available investment level and will propose a portfolio comprised of wines designed to match your investment objectives. There are a number of regions investors can have exposure to. Whilst Bordeaux and Burgundy represent a significant proportion of the wine investment market, Cult Wines also trade in wines from Italy, Champagne, Rhone, Spain, U.S.A, Australia, Loire, Germany & Chile.

 

What Wines are likely to produce the best returns?

A key element in any portfolio which is being structured for investment purposes is diversification, the objective is to ensure wines are included with strong potential growth over the short, medium and long-term, whilst minimising position risk with a sufficient spread across estates, regions and vintages. Proposals will therefore typically reflect the strategic allocation as set out by the Investment Committee, customised by increasing exposure to certain sub-categories and regions depending on your own personal risk tolerance and return objectives. 

Whilst the outperformance of one particular region may suggest investing solely in that category, our aim is to provide our clients with the best risk-adjusted returns, and so we favour a diversified approach that limits an investor’s risk in achieving the best returns for their capital outlay., 

 

Is there a minimum period I must hold the wines for?

Generally, we advise clients to set a minimum 3-5 year horizon for their portfolios in order to benefit from a typical market cycle, with an optimum term of 5-10 years.

However, should you wish to sell your wines at any stage, we will liquidate stock upon request. If you sell your wines within the first three years there will be a small sliding scale liquidation fee charged, but if you hold your investment for at least three years, there is no liquidation fee levied on the sale of wine.

 

What are the likely returns on a typical Cult Wines investment portfolio?

 

Returns

 

Who holds my wines? Where are they kept?

All our client wines are stored under-bond (exempt of UK duties and VAT, in an HMRC controlled warehouse) in a 24,000 square foot state of the art specialist wine storage facility with full-coverage temperature and humidity control. The warehouse is located in Wiltshire, England which is around a 2-hour drive from Central London (1 hr 20 minutes by train). All assets are allocated to your Reserve Customer Code, logged with the warehouse and UK government, which can be independently verified with LCB (London City Bond – the warehouse administrators). Visits to the warehouse can be arranged upon request. You will have online access to your storage records.

  • Dedicated warehouse staff offering speed of service for all customers.
  • Individual customer sub-accounts, providing greater security of asset ownership.
  • Full-coverage temperature and humidity control.
  • State of the art photographic studio available for all cases.
  • Additional authenticity checks using specialist equipment and training.
  • Comprehensive replacement-value insurance policy for all stock.
  • Protection against fire hazard.
  • 24/7, 365-days a year security.

 

What fees do you charge for managing my wine portfolio?

Cult Wines charges all Portfolio Management Account clients a flat 2% annual management fee (This is inclusive of any local taxes that may apply).  This management fee covers all of your storage and insurance costs, as well as ongoing management of your portfolio including trading on your account at 0%. When you invest capital there is an additional Acquisition and Operations ‘A&O’ fee which is levied on each purchase. This covers the cost of Cult Wines undertaking the research, identifying the wine, acquiring the stock through our network of suppliers, shipping and consolidating all of your assets in the UK including physical checks of inventory, and allocating the wines to your personal warehouse account. Depending on your level of investment this fee will change. Up to £250,000 you will pay 5%, over £250,000 and up to £1million this is reduced to 2.5% and for £1million plus there is no A&O fee on purchases.

As described we do not charge any liquidation fees upon exit, however at the point that you liquidate your holdings if we have generated outperformance above a 7% per annum hurdle rate (net of fees), we will charge a 20% performance fee on the amount above the hurdle. If you keep your investment for longer than 5 years, then we will charge this annually taken from the proceeds of wine sales.

For information on the fees we charge, please download a copy of our Investing with Cult Wines document.

 

What taxes would be applied to gains made from the disposal of wine?

Client wine reserves stored in bond are VAT-exempt as they are considered 'in-transit'. If you decide to remove your wines from a bonded warehouse, they will become liable for VAT and Excise Duty.

We always recommend discussing new investments with your tax advisor to ensure you can experience the full benefit from investing in Fine Wine. 

For UK investors, fine wine is considered a 'wasting asset' and thus is generally considered exempt from Capital Gains Tax (CGT). For more information on fine wine, CGT and Inheritance Tax, please visit our Tax Considerations page. 

For US based investors, we would recommend speaking to your tax advisor, but gains from wine would need to be reported annually (regardless of sales) and would be subject to ‘collectibles’ tax at 30% plus your federal state tax rate. Cult Wines will provide you with all the relevant information required for your annual tax submission.

For Hong Kong and Singapore based investors, there are no taxes to be paid on gains made from fine wine.

For Japanese based investors, if the investment is held for less than 5 years it is seen as a short-term gain, taxed at standard 45% 45% national tax. Once held longer than 5 years, the tax on gains can be reduced significantly.

If you would like further information on any of the countries listed above, or would like information on the tax treatment of wine in your own country, please contact us.

How to Invest with Cult Wines

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This essential Fine Wine Investment Guide will take you through the complete, transparent and informative journey of Wine Investment.