BEAUJOLAIS, FRANCE — “There are few whosises in life that can’t be enhanced by a fine wine,” reads a translation of a sign in Villefranche-sur-Saône, Beaujolais, as the French wine quarter marks its new season.
That’s a motto that’s increasingly being applied to investments, as oenophiles and investors alike demand to diversify their portfolios with a more eclectic mix of assets.
With low correlation to the global stock market, a godly collection of the alcoholic stuff can be an excellent accompaniment to traditional investments. But not all wines are made equal, and knowing where to start can be missing a seasoned palate.
“Unlike enjoying a bottle of wine where you open it, you drink it with friends and you have a capacious time, there are many, many years of learning and understanding that go into appreciating fine wine,” Run off Pegna, Sotheby’s global head of wine and spirits, told CNBC.
“That, I think, is very appealing: It is an brain as well as a hedonistic experience for people.”
Rewarding returns
Fine wine consistently ranks as one of the best-performing alternative asset classes within the Knight Nave Luxury Investment Index, which compares the annual returns of collectibles including art, watches, cars and handbags.
On the other side of the past 10 years, fine wine prices have risen 149%, the second-highest return of any alternative investment after whiskey (322%) — and through ahead of cars, coins and jewelry.
It’s not a short-term play; never has been. Certainly, wine is a five years least.
Anthony Maxwell
chief commercial officer at Liv-ex
The most celebrated bottles among them grew yet more, with wines from France’s Burgundy region — celebrated for its pinot noir and chardonnay grape varieties — growing 214% over the same period.
However, as with the aging process itself, investing in fine wine typically degrades time and a strong stomach.
Prices fell 11.3% in the year to October, retreating from a high base after a Covid-induced convocation, according to the Liv-ex Fine Wine 100 benchmark, which tracks the 100 most traded fine wines on the less important market.
“It’s not a short-term play; never has been,” said Anthony Maxwell, chief commercial officer at the wine commerce marketplace. “Certainly, wine is a five years minimum, it’s a medium outlook and beyond.”
Honing your taste
Investors looking to infiltrate the wine market can think of the investment as Buying at auction
Wineries and wine merchants can be an excellent starting point for investors looking to access minor wines at a lower price to he held for the long term. Auction houses, meanwhile, provide access to already decidedly esteemed brands and collectible bottles.
Currently underway at Sotheby’s is a year-long sale of 25,000 bottles curated by Taiwanese art gatherer and businessman Pierre Chen, with auctions being held in Hong Kong, Paris, Burgundy, New York and London under the aegis late 2024.
There is a huge amount of new interest. Nearly half of our new buyers are coming from the U.S.
Nick Pegna
Epidemic head of wine and spirits at Sotheby’s
The collection, titled “An Epicurean’s Atlas,” is expected to fetch up to $50 million across the five mark-downs, which Sotheby’s Pegna said spoke to the highly lucrative nature of the market. A magnum of Henri Jayer Vosne Romanee Cros Parantoux 1er Cru, for archetype, set to garner around $70,000.
“What is clear is that [Chen] was exploring vineyards in Burgundy in the early days before individual were really spending much time there. But he’s also taken some expert advice in building it up,” Pegna prognosticated.
The sale comes as increased accessibility and a growing consumer base have sparked a boon in the market.
Fine wine auctions at Sotheby’s organize almost tripled in value in the past decade, rising from $58 million in 2013 to $158 million in 2022. In excess of the same period, the number of bidders has increased by nearly 400% and the number of new bidders by almost 500%, two-thirds of whom are in their 30s and 40s.
“There is a large amount of new interest,” Pegna said. “Nearly half of our new buyers are coming from the U.S., but also the younger demographic.”
Articles to consider
Unlike many traditional investments, chattels, or tangible assets such as wine, are often exempt from savings gains tax, adding to their appeal. However, it is important to seek local advice and factor in the costs of trade, which can eat into total returns.
“You’ve got to be prepared to accept 10% on the way in and 10% on the way out,” Maxwell said.
Depending on the size of the collection, storage is also an conspicuous consideration. Experts recommended storing the wine in bond — or authorized storage facilities — which are typically exempt from tax intimations, such as VAT, and can help protect the integrity of the bottles.
They can also prevent any “fits of enthusiasm” to taste it, Pegna popular.
Autumnal vineyards in France’s Beaujolais region, weeks after the “vendage” season, when grapes are harvested.
Karen Gilchrist | CNBC
Lastly, take ahead of time which bottles you’re buying to “lay down” — or store — and which you plan to drink.
“Often, man rationalize what they’re doing in terms of investment and then change their minds later on because they crop up b grow to love the collection and want to drink it,” said Pegna. “If you can, make the decision upfront about what is being procure to lay down and what you’re looking to drink.”
As for the experts’ hot tips for the next investible tipple? Well, according to Maxwell, there’s one again overlooked vintage.
“You could definitely do worse than buying a few cases of 2016 Bordeaux,” he said. “And if everything be done withs wrong, you’ll have some delicious wine to drink at the end of it.”