The allure of wine collecting as an alternative investment has become more popular during recent times of economic uncertainty. At its core, building a wine collection is about laying down globally recognised brands from established years, (known as vintage) with values that represent opportunity. If consumption brings rarity, then aging in the bottle brings legacy. These two factors combined, particularly the aspect of wines getting better as they get older, are why fine wine remains one of the most unique collectibles around.
Many of the top wine regions have protective laws in place to ensure quality over quantity, some of these laws were introduced centuries ago, when production levels were catering for just a 50 mile radius. The most recognised restriction, dating back to the 15th century, The Appellation d’Origine Controlee (AOC) system in France has ensured long term growth in the most established vintages. Some of these restrictions can be so tight that certain brands in the world make less than 500 cases of wine a year!
In a time where taxes are on the rise, tax efficiency has become extremely valuable to all types of investors looking to protect their wealth. Wines that have a shelf life of 50 years or less are regarded as a ‘wasting asset’ by HMRC and are therefore CGT exempt*.
Today, traditional investments feel more intertwined than ever before due to global trade, which presents the challenges of diversification and spreading risk. For example, in 2022 it was declared that stocks and bonds were now following the same trend lines for the first time ever, ripping up the age-old philosophy of buying the two asset classes 50/50 to create balance in a portfolio. Fine wine has benefitted from low volatility and resilience in the recent economic challenges, and has achieved double digit returns in both of the last two recessions.**
Emerging economies are playing a major role in luxury spending trends and 10 years ago there were around 14 million millionaires worldwide. Today there are 58 million millionaires, partly due to huge growth in the Far East and Latin America. Fine wine demand has been a huge beneficiary of this growth and auction houses are a great example of this where collectors from new nations are not only participating in the bidding, but also spending world record sums of money for the rarest wines.
In a world of digital currency and automated systems, owning physical assets can provide stability for individuals who are seeking a balanced and diversified asset allocation. Wine investments are held and stored in privately owned accounts at government recognised bonded warehouses and are fully insured.
*We recommend seeking your own independent investment and tax advice. **Liv-ex 1000 indices
Since the millennium, in any recession, very few assets had positive gain every time, after all, there have been some challenging economic periods especially in Covid-19 and the financial crisis of 2009. On all occasions, fine wine performed favourably standing out as an area of resilience and gaining credibility as an alternative asset.*
Generally speaking, mainstream markets are once again close to their all-time highs, so diversification is once again an important consideration. Whether it’s profit taking from equities or caution against tax, this economy is not without its challenges and fine wine is positioned to welcome some of these funds into the rarest and most sought-after Grand Cru.
*Start of the official technical recession in the UK, through 24 months
Wine performance taken from the Liv-ex1000 indices.
With many established wine making regions globally, selecting which wine to consider could be seen as a time consuming process.
However, only a fraction of wine producers carry such a historic brand presence that can only be developed over decades of wine production and global demand.
So with this in mind, how do investors begin to separate the wheat from the chaff (so to speak). Where do you start?
How it works
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