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Bordeaux-Traders: Fine Wines as an Alternative Investment

Posted: Thursday, 09 August 2012 15:48

Bordeaux-Traders: Fine Wines as an Alternative Investment

August 09 : The steep drop of up to 40 percent in prices of fine wines last year and spilling over to this year too could be an opportunity to diversify your investment portfolio and invest in fine wines but you may need the help of an expert who understands the business and the Indian psyche, says Robin Khanna, founder owner of Vienna based Bordeaux Traders, who was in India recently to open a branch office in Mumbai

Prices for fine wines sky-rocketed during 2009 and 2010 but seem to have peaked last year, according to the Liv-ex 100, an industry benchmark and a composite price index. However, not all prices are falling. For example the price of Petrus ’89 has been constantly going up this year. This is where the help of an expert like Robin Khanna is crucial.

Robin Khanna, whom I first met in Vienna couple of months ago, is an Austrian born in Vienna to Indian parents from Chandigarh. He has been based since 2009 in the Austrian capital where he spent most of his childhood and founded his own company to manage clients’ fine wine portfolio including purchase, transport, storage, insurance and the eventual sale of their wines. He is the owner and founder of Bordeaux Traders, a fine wine investment brokerage in Vienna that recently opened an office in Mumbai to educate and handle wine portfolio for the Indians looking for an alternative investment.

Why Vienna when London is the capital of fine wine investments, I ask Robin? ‘Since I was working in the fine wine industry in London where all markets were down, it made sense to move back to my home town of Vienna and launch a similar business there. I knew it was a new market and I was, in fact, the only business in the country offering this kind of service,’ says Robin.

He concedes going through a rough patch initially. ‘I had a few setbacks at the beginning but it has been proven that shrewd wine investments are highly beneficial and lucrative, as certain investors started enjoying double or even triple digit returns, and the business just lifted off from there,’ says Robin with a smile of confidence. Being in Vienna also carries the advantage of being based in Central Europe with quicker delivery times, more efficiency and further transparency for his clients, he says.

He admits that he got excited about wine investments while working in London as a share broker. As the recession hit Europe many companies got into serious financial difficulties. This is when he came across wine investment broking. He worked for several companies including Bordeaux Connoisseurs Ltd and Berry Bros, before launching his company. ‘We look into a number of things, like management, purchase, transport, storage, insurance and the eventual sale of our client’s portfolio’, he says.

The advantage a tangible asset like luxury wine offers is that it can be sold globally, at any time, in any currency. It is a more secure way to prevent the depreciation of one’s assets, asserts Robin.

In India, interest in investing in fine wines is growing. However, little is known about the prospects. So Khanna offered some insight into the relatively new field for Indian investors, especially those who appreciate wine as a lifestyle, a healthy beverage and would enjoy investing in it for profit as much as drinking it.

Recession proof investment

Investing in wine is recession proof, claims Robin as some of the most renowned wines, like those from select top growth chateaux in Bordeaux are very limited in supply. These wineries produce only a few thousand cases and as soon as a bottle is opened, the quantity gets reduced globally. While the supply reduces, demand remains high. If it is a good harvest, the demand is tremendous. Due to his deep connections in Bordeaux, Khanna feels he can help his clients follow the golden rule of buying low and selling high, as they are able to find very rare wines at good prices.

He advises that selection of a reputed company to help buy wines for your portfolio is very important. It is a booming business in Europe but there are people who try to pull off scams. The labels of famous Bordeaux wines are easy to copy and there are occasional cases of fake wines circulating in the market. Therefore one must make sure that the wine purchased is certified and authenticated. ‘We always offer a certificate of authenticity, and most reputable companies also do the same,’ he says.

India office

Robin opened an office in Mumbai a couple of months ago. ‘We had several enquiries from Indians who wanted to invest in fine wine as an alternative investment. With the stock markets nose diving and the rupee tanking, they are looking to hedge their funds and with our experience in the stock and wine market I feel we can help them invest wisely and look after their portfolio,’ he says. Since he has his roots in India, he feels that the clients have a comfort factor dealing with his company and the advice he can offer.

He won’t suggest investing in the 2011 vintage though there’s some value to be found in some well rated wines which have declared reasonable prices. He recommends investing in older vintages like 1989, 2000 & 2005. If one has the holding capacity for 7-10 years, 2009, 2010 and even a few 2008 would make a good investment, he feels.

Khanna believes that high net worth individuals (HNIs) will be the initial drivers of the relatively new concept of fine wine investing in India. As these people make profits, the idea will gain popularity and people will realize how profitable it is and other private investors will also feel encouraged to invest, thus making the spectrum of investors wider.

Investing in fine wines abroad is quite legal. Under the Liberalized Remittance Scheme all resident individuals, including minors, are allowed to freely remit up to USD 200,000 in a financial year. Resident individuals can acquire and hold immovable property or shares or debt instruments or any other assets outside India, without prior approval of the Reserve Bank. Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the Scheme. (Source- RBI) He agrees that any one individual may have to cap the amount to this figure each year but each family member can invest in his or her individual capacity.

Interestingly, the high duties in India would not be an obstacle for investment in fine wines as the wines will be purchased, stored and sold outside India.

Word of Caution

Khanna concludes with a word of a caution however, saying that this is not for everyone. Investing in wine is expensive, and the minimum amount should be around €10,000. For the HNIs, it could go up to €50,000-100,000. This is a medium to long term investment, as prices do fluctuate in the short term. Experts and academic studies recommend investors approach fine wine like gold, though wine is harder to buy and sell. They generally agree that no more than 5-10 percent of a portfolio should be dedicated to wine. However, Robin feels 20%-30% of one’s portfolio should be in fine wine investment, subject to the limitations in remittances.

Although there is much speculation on the consequences of India opening up to the wine investment trade, no one can predict exactly how the industry will transform with a flood of shrewd Indian investors. However, one thing is clear; as the Indian economy continues its explosive growth, there is no doubt that India looks set to be a key player in the fine wine market in the near future, says Robin.

Khanna, with one leg each in Vienna and Mumbai could be the right person to contact if you are considering investment in fine wines. He plans to be in Mumbai soon. You may contact him at robink@bordeaux-traders.com or check out his wine investment website, before. However, use caution in taking the investment step in an area that offers a potential for high returns and is a good hedging asset class but despite the recent lower prices the fine wine market may not have yet bottomed out.

Subhash Arora

       

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