The fundamentals of fine wine investing come down to two factors: supply and demand: as fine wine matures and improves with age, it becomes more desirable – and therefore valuable – over time, while the consumption of fine wines increases the rarity of certain vintages, pushing the price up as more investors seek out fewer bottles. And the situation is compounded by an ever increasing global demand for this particular asset.
“The fundamental demand and supply imbalance that underpins this market has always seen prices for the greatest fine wines appreciate”
Why Invest in Fine Wine?
Investing in fine wine brings a raft of benefits. To start with, the addition of a new asset such as fine wine to an investment portfolio provides important diversification, which mitigates risk and reduces levels of volatility – wine is a tax-free asset that performs consistently while providing portfolio protection in a way that traditional financial assets fail to offer.
Fine wine investment can act as a defensive holding as it has the capacity to remain stable under difficult economic conditions. It has the advantage of not necessarily following the general trend of lagging behind the rest of the market during economic expansion because demand is consistently strong.
Real assets remain an attractive option as they tend to change in value independently of the core financial markets. Of course, returns are important, and as academic research has shown, fine wine has historically produced long term average returns in the region of 13% per annum, while also showing a low correlation with traditional financial assets.