Increased knowledge, the internet, new and resurgent markets, and the ‘in-bond’ status and ‘wasting asset’ tax breaks, have all variously served to turn a side hobby into a bona fide industry.
Our many years experience as merchants, the depth and breadth of our international client base, our state-of-the-art storage facilities, and the fact that we are a member of wine exchange Liv-Ex, means we are well-positioned to help investors negotiate a complex and unregulated industry.
The below shows the industry benchmark Liv-ex 100 compared to the FTSE 100 & the S&P 500 over the last 20 years clearly showing the opportunity that fine wine investment represents.
Why Invest In Wine?
Wine Investment is based around limited availability and the principle that fine wines improves with age, triggering demand which in turn sees prices rise. It is a simple supply and demand model. Traditionally most fine wine was drunk in Europe and North America but in the last 15-20 years we have seen Asia and in particular China become serious consumers and this has coincided with the rise of global wealth and the demand for the very best and finest, whether that be in wine, whisky, cars or luxury accessories.
The fact that wine is a physical asset is also highly appealing to the younger savvy investor who may shy away from more traditional investment vehicles.
How and What Should I Buy?
It is important to focus on well established producers and traditionally Bordeaux has been the most reliable vehicle, but in recent years the phenomenal demand for top Burgundy in Asia has seem prices jump upwards and delivered some spectacular returns. Champagne and Italy also seen significant growth in the past year and should form part of a well curated investment portfolio. We believe that a broad spread of wines gives the best opportunity for growth as well as hedging against any particular wine falling in value.
You should only look to buy wine in bond, that way you never have to pay UK or VAT and you can also sell in bond. It is also a lot cheaper to store 2 cases for GBP 2,000 each rather than 20 cases of GBP 200 each.
We strongly recommend taking a mid to long term view on investing in Fine Wine, this means giving a portfolio at least a 5 year window to mature and show growth, there are of course short term gains available but these should be treated as exceptions rather than the rule. If you invested £10,000 in the FTSE 100 when it was created at the start of 1986, by the end of 2019 your money would be worth about £195,000 today which represents an annualised return of 7.75% (with dividends re-invested), a similar and better return is more than achievable when investing in wine even if you take into account storage fees and the cost of selling.
Storage and Selling Costs
Are There Risks?
The Fine Wine market is not regulated. As such there are potential pitfalls, mainly stemming from bad advice and incorrect pricing. It is essential to take honest and qualified advice from a reputable and established merchant and, moreover, to do your research on both the wines that are being sold to you and the merchant that is selling them.
Any investment has the potential to lose money as well as make money. Fine Wine is no different, and despite the market being relatively well insulated from the macro economy compared to other investments, the possibility of losing money is a real one and should not be ignored.
Please note we are wine merchants and not accredited financial advisors so we recommend you take advice from your accountant or a qualified financial advisor. However, essentially, wine is regarded by HMRC as a ‘wasting asset’ (subject to certain criteria) and therefore not subject to capital gains tax.
With the tax advantage, and the increasingly broad base of wines that are regarded as investment grade, wine is a very attractive ‘alternative asset’ that can fit extremely well into part of a larger portfolio.
We offer a full investment service in sourcing, storing, selling and valuing wine to all investors from the novice right through to the most experienced collector.
Please email firstname.lastname@example.org and we will delighted to answer your questions and help you build up a dynamic wine investment collection.