Fine wine and spirits investing can offer attractive risk adjusted returns and excellent portfolio diversification due to its low correlation with other asset classes
As a tangible and consumable asset, ﬁne wine has historically appreciated by 15%per annum over the last 30 years.
In recent years, global demand for ﬁne wines has accelerated in tandem with a growing population of HNWI.
Supply remains constrained by local regulation as well as Châteaux reducing yields to improve quality.
With supply being further reduced each time a bottle is consumed, ﬁne wine enjoys a unique inverted supply curve.
As with other lifestyle investments, fine wines have the ability to offer attractive risk-adjusted returns.
as well as added diversification due to a low correlation with other asset classes. Since its inception in 1988, the Liv-ex Benchmark Fine Wine Investables Index has grown 1,648% at an average annualized growth rate of 14.8%.
Bordeaux wines have always been at the heart of a Fine Wines investment strategy.
as it is not only the biggest category by volume traded but also holds the longest history spanning back several hundreds of years. Bordeaux is clearly the most liquid region with a high number of transactions taking place daily in major cities such as London, Hong Kong as well as on the Liv-ex exchange.
As for Italy, it has just experienced several great years.
and the overall quality of its wines is clearly on the rise with numerous wineries reaching now international acclaim on a regular basis. The market for Piedmont wines is similar to some extent to that of Burgundy. By comparison, Super Tuscans produce high volumes, like Bordeaux, and thus offer different market dynamics with a strong float and a clear market price for their wines.
The U.S. market for fine wine is now the largest market in the world.
It is largely supported by a rising number of top quality wineries in the Napa Valley and across the country. This rise in quality has translated in a growing demand from importing countries in Asia and Europe.
Finally, the Spirits market benefits from a global supply demand imbalance, particularly true for old Single Malt Whiskeys due to historical capacity constraints and limited production. The sharp rise in demand, including from mainland China, has only made these spirits even rarer and more valuable.
Burgundy is one of the most complex wine regions in the world.
with hundreds of small appellations and micro parcels. Top wines are usually produced at the level of a few thousands bottles per year, when Petrus as a benchmark is produced at 28 000 bottles per year and is already considered as one of the rarest Bordeaux.
We believe that the dynamics of the fine wine market are still very much intact today.
Primarily, the market offers a structural shortage of supply due to regulatory constraints and yield restrictions. Increasing demand from globalization and a rapidly growing number of luxury-hungry consumers add further upward pressure to prices. Fine wine also has the unique characteristic of improving in quality as it matures. The combination of these factors is supportive of higher prices over time making fine wines a particularly attractive asset class.