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Wine Investments: Winetage-The Wine Advantage

Posted: Monday, 06 December 2010 10:49

Wine Investments: Winetage-The Wine Advantage

Investing in wine is becoming as fashionable as wine drinking in India, with the media highlighting the opportunity but there is not much information about how to do it. One of the options available to a small or medium investor is from Winetage Investments Ltd., run by Paris-based Meenu Kohli, who appears to have had an impressive performance so far, reports Subhash Arora, who had a long chat with her as she shared her vision during her recent visit to India.

Early Days

Meenu Kohli grew up in an environment of a traditional Indian family. Her father, a district judge in the UP cadre, was crying hoarse about PCM (Physics Chemistry Math), until she finally cleared her IIT exams, only to find that she could not secure the right branch to get into the IAS.

She ended up doing electrical engineering from IET Lucknow only because it was amongst the very few state engineering colleges to have a decent girls’ hostel back then. She ditched a potential job in Telco in favour of studying for MBA Finance at MDI Gurgaon where she learnt about ‘buy & hold’ strategy for the first time & implemented it immediately by tying the knot with her life partner. 

After traversing the corporate world with panache, she moved with her husband to Frankfurt where she got hooked onto wine as she acquired a taste for it. ‘Love at first sip’, she started delving into the reds & whites, still dabbling with the cheap & cheerful variety all through her later  moves to London and Helsinki.

Drinking and Dabbling in Wine

Not until her arrival in France in 2005  did this love turn into passion; and energy to explore seeped in. Trips to Bordeaux, wine-tasting courses, and blind tastings with friends kept her getting engaged at a deeper level. ‘ I started investing in wine personally with my husband, original idea being if we invest every year from now onwards, in 5 years we can have our  own good quality wine free from the investments,’ she says looking back.

Last year, she weaned herself off  her nice, stable, salaried UNESCO job and decided it was time to take her passion for wine to another level. ‘ I decided to share this idea with a broader base of friends and family and finally set up Winetage Investments Limited in 2009,’ says the founder of the London/Paris based fund- perhaps the first one run by an NRI offering  a wine investment opportunity to people living in India.

She was fortunate to get audience and approval from three big Bordeaux names. ‘Lilian Barton (Chateaux Leoville Barton), Charles Sichel (Chateaux Palmer), Jean Luc Thunevin (Chateaux Valandraud) are on our advisory board and investment committee. Voila, the return as of Nov’10 for 2009 investments is +200%, and +30% for 2010 investments,’ she says. Not bad for a start up!

Investing in Wines

According to Kohli, wine has established itself as a serious investment class in the west, driven by consistent growth. She says,’ within a framework of low risk & volatility, fine wine provides true diversification with low correlation to other asset classes. Over the last decade wine has been  next only to gold in terms of overall returns, higher than any equity market ,including emerging markets.’

Besides the high returns, she says, the investment in fine wines is also much less risky than investing in equity markets in India. Hence the risk –reward ratio for fine wines is very high. Meenu believes that any investor should diversify their portfolio to hedge their risks.  ‘As the money required to invest even in one case of fine, investible wine is high; it is more interesting to invest with funds like Winetage who have the access to wines and can diversify the wine portfolio while ensuring the exit at the right time to maximize profits,’ she says, plugging for her fund.

Besides the low correlation and a good hedge to the portfolio, she says that the fine Bordeaux wines have an underlying demand- supply gap, which is incredible and ever increasing. Evidence has been the Lafite 2008 wine, which was bought by Winetage at around £2,500 a case, and is now quoted at £15,000 (thanks to the Chinese!)… a multifold increase over 18 months.

Investing with Winetage

‘It is easy to invest in this opportunity,’ she says. There are the options of DIY (Do-it-yourself) portfolio or the wine fund. Explaining further, she says,’ usually real value creation in wine comes from holding the physical stock for mid-term, around five years.

'For a DIY portfolio, you need a minimum investment of Rs. 5 million, besides a thorough understanding of the wine business. The challenge then is sourcing wine in a way that there is no conflict of interest with a wine distributor. Otherwise you could end up with stock that is difficult to sell later as channels of sales are limited too.'

'With the customs duties being over 150%, the cost of access in India could be crazy along with challenges for storage. Moreover, it is not so easy to identify reliable distributors as they try to balance the hats of wine distribution and investment advice. For funds on the other hand, there are options with high entry-level tickets size and the returns, though stable, have not been spectacular and are plagued with high fee structure,' she feels.

Winetage Advantage

‘Winetage Investments offers a sound alternative,’ she says, ‘with low one time 2% investment fee, 0% management fee and 20% share of profits.Professionally managed, along with the highly acclaimed & knowledgeable investment committee including the three Bordeaux luminaries, they seem to offer a good and practical alternative. 

How much investment does one need to make? ‘One can invest a minimum amount of £5,100 (Rupees 350,000) for which we issue them shares.  These shares are locked-in for a period of 5 years and only under exceptional circumstances can one exit earlier (making it a truly  long term investment). The money is transferred via bank transfer or cheque.

The forms to be filled out by the Indian investors are available on request. The investors receive a semi-annual personal statement and monthly performance report of their fund. Valuation is done on a monthly basis by external experts to ensure realistic and achievable returns. Valuation is also used for monthly insurance of the stock that is stored in Bordeaux. At the end of the investment horizon, the money is returned net of 20% share of profits.

For ardent wine lovers, they have an option to buy some high quality stock at market price. For Indian investors, this will be treated as long-term capital gain', she adds.

According to current RBI guidelines, up to $200,000 per annum can be invested abroad. Therefore, it is easy to invest with Winetage Investments up to this amount. ‘Of course we would be glad to send the relevant forms’, she says.

Curiously, I offer to invest Rs.100, 000 as an experiment in wine investment with Winetage. She declines politely,’I am sorry we cannot accept less than £ 5100, since any exception would be unfair to the existing investors and we treat everyone from any part of the world with equal respect.’

Competitive Advantage

So what is their competitive advantage? Meenu explains, “Excellent published track record with over 200% returns over just  12 months. sound advice built on inputs from experts in the wine trading business with over 15 generations of experience, unparalleled reliable access to channels such as negociants, Liv-ex (Winetage is a registered trader with Liv-ex) and secondary trade which eases buying as well as selling of fine wines. These are some of the advantages we offer to our investors,’ adding,’ of course, being located at the heart of the wine action in France is difficult to parallel. Besides low fee structure, we make money only if our investors make money.”

Safety of Investment

Left to Right : Charles Sichel (Chateau Palmer/Maison Sichel), Meenu Kohli (Winetage Investments), Lilian Barton (Chateau Leoville Barton), Jean Luc Thunevin (Chateau Valandraud)
Conceding the downside of the investments in wine, especially if one falls into the wrong hands, Meenu says, “Unfortunately there is no litmus test of integrity, as we have seen over the last three years. Investors have been cheated in the most regulated of environments, be it CDOs, mis- valuation of funds or even false sales of en-primeur campaign, which your newsletter delWine reported recently. For Winetage Investments, I can vouch that we are a genuine company with a genuine team in place, including some of the most reputable names in the wine business, a track record of 12+ months already, including two tranches of deploying funds in wine. Unlike several “offshore” funds, we are covered under UK company law which makes us more accountable than a ‘Tax savvy’ financial outfit. We have the passion & ambition to create a brand, which requires rigor, patience, integrity & a close relationship with all investors. We encourage investors to speak to us or meet us if possible either when we are in India or when they are in France.”

Diversify to Solidify

As a company that lives with the motto of “Diversify to Solidify”, they do not recommend that you bet only on wine, but Winetage Investments do suggest that wine should form part of any mid to large sized investment portfolio.

Perhaps it is time to bid goodbye to portfolio returns that look like ECG graphs, and say cheers to investment in wine and a good night’s sleep!!

Subhash Arora

Winetage will be on our radar and we hope to track their performance during the next 3-4 months and come back to our readers with a report-editor

Comments:

 

Neeraj Sinha Says:

Want to have more details on investment options and path forward.

Posted @ December 22, 2010 10:41

 

jatmdi Says:

It's interesting to know about your journey and start up which is innovative for indian Public and it is a pleasure to share that you are my alumni from MDI Gurgaon.

Posted @ December 08, 2010 10:19

 
       

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