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According to the London based Liv-Ex Fine Wine Exchange, Fine wines from Bordeaux gave a record return and turned out to be more lucrative than other commodities and stock market investments. It announced that the Live-Ex Fine Wine 50, an index charting the Top Growths from Bordeaux rose by 57% in 2010. This compares very well with an unexpected rise of Gold by 35% and crude oil by 20% according to a report in Decanter. The stock market saw an average increase of around 12% only.
It’s an open secret that the increase has been propelled by the thirsty Asian markets, especially in China and Hong Kong where Chateau Lafite, the darling of affluent Chinese scored over 100% gains, once over 20% overnight when the winery announced a new symbol in Chinese for the 2008 vintage. As reported in delWine recently, the Hong Kong Auctions dealing mostly in Bordeaux Fine Wines had a phenomenal run in 2010 and replaced both London and New York as the leading auction venue on the planet.
With the rise in demand and the prices of Bordeaux Top Five scoring unprecedented gains, the thirst for a few other Bordeaux labels has been increasing with an increasing interest in top Burgundy and Sauternes too.
Although the index has doubled during the last two years, an average of 15% had been achieved in this market, according to information from Liv-Ex. Another benchmark index Live –Ex 100, based on 100 top collectible wines went up by 40.5% during 2010, according to their website.
Naturally, it would be a fantasy to expect the returns of 2010 in future as well. Paris based Indian entrepreneur Meenu Kohli, Director of Winetage Investments Ltd. started her the Fine Wine Fund in 2009 in London and Paris. She has been able to provide three digit returns to initial investors but is conservative in projecting a steady return of 12-15% a year. She says, ‘while 2010 may come across as an abnormal year, the three year compounded annual growth rate for wine prices as represented by Liv-Ex 100 benchmark, for 2008 –10 has been @12%, which is consistent with the philosophy of steady returns from wine. No wonder we advise our clients ‘diversify to solidify’ to mitigate the risk of volatility.’ It may be pertinent to mention that the BSE Sensex growth rate over the same period has been practically nil (Sensex closed in Dec’07 at 20,287, almost same as in Dec ‘10).
She is, however, quite optimistic about the future price movements and says with confidence, ‘when you see 10 million millionaires in the latest Forbes reports & you know that every year we have only 150 thousand cases of fine wine produced & even less sold, you look at the supply and demand pattern and know the direction where the prices will move.’
Is it worth it to invest in fine wines, then? While it would be naïve to assume that it would ever replace gold as an investment, particularly for those in India as we value solid gold as a liquid investment. But investing in fine wine is truly a liquid investment for those who like to drink their investment.
A word of caution though- the fine wines are traded on paper as wine futures (En Primeur) while they are in barrels and then held in ex-bond on physical release, in major cities like London, Paris, New York or now Hong Kong where there are no duties. If they are to be consumed, the local duties are to be paid-which might be refunded at the airport if exported but the import duty of 150% will be awaiting you at any of the entry points in India.
Subhash Arora |