Even if this type of investment remains little known, savvy investors have been investing in fine wine for many years.
3 main reasons:
– Fine Wine prices increase naturally:
. Limited and decreasing Supply: fine wine supply is limited as only a small quantity of fine wines is produced each year (1855 classification). The supply decreases because the bottles are consumed every day around the world. In the meantime, fine wines quality improves with the aging process.
. Increasing Demand: Fine wine is a luxury product and, as such, its demand is growing globally. There are an increasing number of people drinking and investing in fine wines everywhere in the world. Demand is also growing due to the increasing interest from the Asian market since the abolition in February 2008 of the wine duty by the Hong Kong government.
Therefore, with a limited, decreasing Supply and an increasing Demand, fine wine prices increase naturally thanks to the simple Law of Markets, Fine Wine prices increase naturally.
– The Fine Wine market shows low correlation with the regulated financial market:
According to the American Association of Wine Economists “fine wine yields higher returns and has a lower volatility compared to stock especially in times of economic crises”. It shows “low correlation with the other asset classes” and “…the addition of wine to a portfolio as a separate asset-class is beneficial for private investors”. Their findings show that “the inclusion of wine in a portfolio and especially more prestigious wines increases the portfolio’s returns while reducing its risks, particularly during the financial crisis”.
– The Fine Wine market is a transparent market: Over the past 10 years, indices have emerged e.g.: Liv-ex 1000 Index (index calculated on the price movement of the 1000 most thought-after wines, www.liv-ex.com) and have improved transparency and liquidity in this market. This has rendered the fine wine market even more attractive to investors as we can easily determine a market price for fine wines.
NB: Fine Wine investment can be a Tax-free investment:
Wines stored in bonded warehouses are not subject to VAT or duties. In UK, depending on circumstances, fine wine may or may not attract CGT when it is resold. We are not regulated by the FSA. We recommend to read the guidance issued by HMRC Tax Bulletin 42 and to get advice from a tax specialist to ensure that wine investment is a sound option for you.
Feel free to contact us now for more information and to start your Fine Wine Investment plan.