Liquid Gold

07.04.22

Discover the best kept secret in the alternative investment space. With low correlation to traditional equity markets, fine wine investment is soaring to new heights, as Gregory Swartberg CEO of Cru Wine explains…

During periods of inflation, gold has traditionally been viewed as a “safe hedge” but in 2021, fine wine outperformed several traditional equity markets, surging to record highs, as this alternative asset can bring stability during market crises.

Over 2021, fine wine, as measured by the Liv-ex 100 index¹, has been a better investment than several traditional equity markets, including Dow Jones, the FTSE 100 and gold. As the gold market stumbled by -3.8%, fine wine surged ahead ending the year at +20.8%. In the recent Wealth Report published by Knight Frank, we saw wine continue its upward trajectory on the Knight Frank Luxury Investment Index, showing a 10-year change of +137%, ahead of other luxury collectables such as art and watches and only just behind vintage cars and rare whisky.

So why are more and more investors looking to hedge their bets and diversify into the world of fine wine?

The underlying principle of investing in wine is that the quality and rarity of fine wine increase over time, and therefore, so does its value. A finite number of bottles are produced each vintage and over time, as the corks on these bottles are popped, the value of the remaining ones increase.

The fine wine market also has a track record of low volatility and providing protection in market downturns and diversification in sources of return. Fine wine has shown a 0.1 – 0.2 correlation to major indices over the last 20 years. This was shown during the largest market crises in recent decades, as fine wine performed relatively well and bounced back quickly during the global financial crisis and the Covid-19 outbreak.

If you’re based in the UK, fine wine is also extremely tax efficient, as it is considered a “wasting asset” so it qualifies for exemption from Capital Gains tax.

Let’s take a look at a current case of fine wine – 1989 Château Haut-Brion, from Pessac-Léognan in Bordeaux. When this was first released from the Château the following summer, a case of 12 bottles was worth £360. Some 30 years later, that same case is worth over £25,000 – a return just shy of 7,000%. Had you put your money into major asset classes like Gold or FTSE 100, you’d only be looking at returns between 200-300%. Quite a difference.

At Cru Wine, we believe that fine wine can form a permanent component of an investment portfolio with the potential to deliver positive returns through shifts in inflation and other economic downturns. Our philosophy is to provide a tailored approach to fine wine investment that is tailored to your needs and objectives, and we’ll build you a profitable wine portfolio that is forward-looking, diversified and designed to deliver long term returns.

Once your portfolio has been created and you’ve picked out your wines it’s time to sit back and relax, preferably with a glass or two of good claret, as fine wine needs patience but can richly reward. And that’s one of our favourite parts of building a collection of sought-after fine wines, the pleasure of popping a cork and savouring a wine you own with friends and loved ones is just a pleasurable as the financial benefits afforded from investing in them. A good vintage never changes, it just gets better with age.

Cru Wine is a passionate team of fine wine specialists who enrich the wine buying, collecting and drinking experience for wine lovers around the world.