Fine Wine Flows into Alternative Asset Portfolios
Aug 14. 2019 Family offices and institutional investors often add alternative assets to their portfolios in an effort to diversify. However, truly unconventional assets remain the purview of niche investors. Vintage cars, land with water rights, and copyright royalties are so far from the mainstream that they thread the line between hobby and investment. One niche alternative asset class that has been slowly flowing into the mainstream is fine wine.
“It is true that our HNW and UHNW clients have been investing in fine wine for many years,” writes the legal services team at Mishcon de Reya, in an article published on the company’s site. They say interest in fine wine as an alternative investment has hit a record high and demand is being fueled by investors primarily in Russia and China.
Auction house Christie’s offers more insight. The company’s wine director, Tim Triptree, told the Economist that the majority of wine buyers at the company’s auctions were between the ages of 35 and 55. Christie’s sold $1.3 million worth of fine wine at this year’s London auction alone. The most expensive sale was a 12-bottle case of Domaine de la Romanée-Conti 1988, from Burgundy, which fetched $305,135.
But even that case didn’t match the record-breaking $558,000 someone paid for a bottle of 1945 Domaine de la Romanée-Conti Romanee-Conti at a Sotheby’s auction last year.
Buyers haven’t just been flocking to auctions. Investments in the secondary market and placements with professional wine investment managers have also been on the rise.
The London International Vintners Exchange (Liv-ex), which tracks investment data from 400 merchants and traders across 36 countries, publishes an index that offers some transparency to this opaque market. The company’s Fine Wine Investables index has hit a record-high this year, and is up by more than 34% since July 2014.
Meanwhile, Cult Wines, a U.K.-based wine portfolio manager, has delivered a 8.93% compounded annual rate of return since its launch in 2009. At £105 million, the company’s asset under management are also at a record high this year.
Although fine wine is still far from a mainstream asset class for the common investor, wealthy investors seem to be increasingly pouring into this market.