Fine Wine Investment Outperforms All Other Investment Classes Including Gold
On the last day of 2010, Liv-ex published the results of the Liv-ex Fine Wine 50 Index. This indicator tracks the performance of 10 vintages of the 5 Bordeaux First Growths (Lafite, Latour, Mouton, Margaux liv @ mb showflat and Haut Brion). For the first time in its history, it broke the 400 barrier, having been based at 100 in January 2004.
Fine wine as measured by this index in 2010 outperformed all other investment classes including gold and crude oil and made the S&P 500 and FTSE 100 pale in comparison. Even measured over 5 years time, wine easily shows the highest returns:
1 year 2 year 5 year
Liv-ex Fine Wine 50 57% 93% 269%
Gold 35% 52% 204%
Crude Oil 20% 97% 69%
S&P 500 13% 40% 1%
FTSE 100 11% 35% 7%
These figures have attracted a lot of attention from the media. In the past 3 years, it has also led to a surge in the number of companies that sell fine wine as an investment. Some good and some not so good. Whilst investing in fine wine is quite straightforward, you do need to know some of the basics.
Even if you don’t want to familiarize yourself with the wines themselves, you do need to have an understanding of how the companies that help you to buy into fine wine operate.
Basically, you have 3 options:
1- Buying into a wine investment fund
2- Going through a fine wine investment broker
3- Buying directly from a fine wine merchant
Which option is best for you depends for a large part on how much guidance and advise you need. The first 2 options will mean you pay a substantial management fee and you will most likely also pay a performance based fee, but you will be taken by the hand. In return you get the expertise that will hopefully lead to a good return on your investment. The best funds and less so the brokers have the expertise to potentially make your portfolio do better than when bought yourself or when bought based on advise of wine merchants. At the same time, particularly the wine funds will be the most traditional and conservative in their pick of wines. A disadvantage of the funds is that you don’t know nor have a say in which wines they buy. And therefore you’re also unable to judge whether you pay a fair price for these wines.