Fine wine is a rare commodity with an ever-growing gap between supply and demand, which is a key driver of pricing.
Bringing it back to basics, a finite amount of wine is produced in any vintage. Over time, these wines are purchased, collected and consumed so the supply decreases. As investors become more sophisticated and diversify further into alternative investments, the dynamics for investment are attractive given this structural rise in demand due to global wealth increasing.
Wine has outperformed equity markets by a large margin. Since 1998, wine markets have returned 21% compared to 16% for the equity markets. If you are lucky enough to have a 1951 Penfolds Grange in your cellar, a bottle sold in 2021 for $157,000. Not a bad return. Or a if you happened to buy a case of 1989 Chateau Haut-Brion in 1990 for about $700, it is now worth almost $50,000, or a return of almost 7000%.
Fine wine investment is one of the longest standing alternative asset classes, offering effective diversification for your investment portfolio. It provides:
- Low risk and stable returns - low historical volatility helps de risk the overall investment portfolio and, with a stable return profile, improve risk adjusted returns.
- Wine is an asset backed investment - fine wine has an inherent, physical value, which can act as a safe haven for investors during periods of economic uncertainty, recessionary or inflationary. High quality wine becomes more valuable as it matures.
- Wine has low correlation to traditional asset classes - wine can provide downside protection in market downturns and diversification in sources of return.