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HE AUCTIONEER’S gavel struck the rostrum and the wine world gasped – a 12-bottle case had sold for a record HK$1 million (£78,000) at auction, confirming


China’s insatiable thirst for fine wine. Indeed, the emergence of the Far East as a fine wine consumer has sent prices soaring. Collectors are making returns they never thought possible, and it’s attracting mainstream attention to this alternative asset. Fine wines have shown impressive growth over


the past five years and are holding up remarkably well despite the FTSE and NYSE falling precipitously in recent months. The fine wine industry’s benchmark index, the Liv-ex 100, which charts the fortunes of the 100 most sought-after wines, rose 19.3 per cent in the year to the end of August and 121.7 per cent in the past five years. Only gold has outperformed wine as an asset class in this period. In comparison, the FTSE has fallen 1.9 per cent in the same five-year period, and the S&P 500 is up a paltry 1.2 per cent. These figures have turned wine investment from the preserve of wine nerds to a widely accepted and attractive investment prospect. However, investing in wine requires a certain level


of knowledge. Heading down to Waitrose, buying a bottle of £6 Chilean Merlot and leaving it in the cupboard under the stairs for five years will not do anything for the wine’s value. There are a limited number of wines that are considered investment- worthy, and they are predominantly reds from Bordeaux’s Left Bank. The very best Burgundy reds such as Domaine


de la Romanée-Conti, along with a select group of vintage Champagnes including Cristal and Krug, are


also investment worthy, but they’re made in such small quantities that if you want to get your hands on them you’ll need a very good relationship with a fine wine merchant. As time passes, a wine reaches its ‘drinking


window’ – this is deemed to be the best time to drink the wine by the experts, and the very best wines have 10 to12 years before they start to deteriorate. Inevitably, some rich collectors can’t wait to drink their fine wines, and as these wines become increasingly rare, their value rises. Andrew Main of Stratton Street Capital’s Fine Wine Fund, says: “Once it is drunk it cannot be reproduced and so the more mature the wine, the more limited the supply of that particular vintage becomes. Our investment advisors believe that about £1bn of value of the investable wines are drunk every year from a total market of approximately £6bn.” Of course, as with all asset classes, wine prices are


not guaranteed to rise. Amid the Lehman Brothers collapse and stock market freefall, some wines lost as much as 25 per cent of their value in one month, and there was speculation the market would never recover to its previous peak. Fuelled by a thirst for fine Bordeaux in China, however, fine wine prices have recovered and are selling at record highs, and sceptics wonder when the bubble will burst. Yet Neil Pinel, MD of Dunnell’s Premier Wines in Jersey, is more optimistic. “I still believe the very top Bordeaux wines, with good critical ratings, will hold their value – and indeed increase in value – to become worthy of investment,” he says. If you want to start a wine cellar as an investment,


you’ll need to swot up. Being an agricultural product, and so subject to the vagaries of nature,





Fuelled by a thirst for fine Bordeaux in China, fine wine prices are at record highs


A vineyard in Bordeaux, France


October/November 2011 businesslife.co 49


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