For OenoFuture founder and CEO, Daniel Carnio, investing in fine wine is “a no-brainer thanks to the rock-solid returns which reliably hover around the 10% mark”. As well as offering impressively consistent performance, fine wine investment is also extremely safe, as Carnio explains: “Against a backdrop of sustained turbulence on the global markets, fine wine can offer a reliable, secure haven for investors keen to diversify their portfolio and protect their assets.’’
Mike Heffernan, OenoFuture’s Head Financial Analyst, agrees that fine wine investment can offer welcome respite from the volatility of the markets.
He cites the turbulence of the last quarter as a prime example: “The third quarter of the year is usually fairly benign for investors, with relaxing by the pool with a cold drink and not worrying about the markets the default setting for many. This one has turned out to be possibly the most action-packed since 1939.”
“Instead of looking forward to good progress being made on the USA-China trade talks and Central Bank easing/reversing policies,” Heffernan continues, “we have had to contend with the ongoing Brexit shenanigans, Boris Johnson and President Trump facing possible impeachment, ongoing trade war tensions, flare ups in the Gulf, unrest in Hong Kong, bond market swings and continued global growth slowdown.”
Far from being a blissful, carefree summer, “the swings and gyrations of the markets were not good for one’s enjoyment of holiday surroundings, let alone one’s investments.”
Heffernan is quick to point out that “had you invested in fine wine, you would have been able to relax, knowing that no matter what the markets were doing your investment was serenely increasing in value.
“Over Q3 of 2019 the FTSE 100 has returned -0.22%, the Dow +1.18%, S&P500 +1.23% and the Nasdaq -0.09%. As if that wasn’t enough, gold has returned +3.4%, hardly surprising in light of the events, and oil a disappointing -6.05%. In comparison, the Masseto 2007 jumped 13.1% over Q3, while another famous Italian fine wine, Sassicaia 2014, saw growth of 12.4%. ‘Screen watching’ or whiling away the summer in a lounger? I know which one I’d prefer!”
The figures speak even louder when you look back over the past couple of decades. Since 2005, the FTSE 100 has returned 94.9%, classic cars 245.8%, and the fine wine market 198.0%. Heffernan explains that with the classic car market being out of reach for many, fine wine offers an easier, more accessible investment option with excellent opportunities even for passive investors.
Although the top fine wine sale of 2018 was a $558,000 bottle of 1945 Romanée-Conti sold at Sotheby’s, investors can start building their portfolio with an initial investment as low as £10,000.
Unlike other alternative assets like art, classic cars, or antiques, fine wine comes with a unique benefit for those who enjoy the good life. “The most beautiful aspect of fine wine investment is that you can always drink it,’’ comments Carnio. Wine is made to be drunk, enjoyed, and shared with those precious people in your life, and this is yet another reason why the world’s rarest wines make particularly sound investments. As each year goes by availability decreases, driving up prices for those who are fortunate enough to have held onto the last remaining bottles.
If you had invested in fine wine this year, you could relax knowing that no matter what the markets were doing your investment was increasing in value
Allied to this is the growing global appetite for fine wine. In Asia purchases of bottles costing over $200 has increased by over 70% over the past year. Annually, 118 billion glasses are consumed in China alone. When combined with the fact that over the past couple of years global wine production has hit its lowest point in 60 years, these drivers are contributing to an expected price rise of 20% in 2019.
So, how do you know which wines to buy? The first thing you need to consider is that less than 1% of the wine produced globally is considered investment grade. For those wishing to enter the market, the Liv-ex index can be a useful tool to guide you on which wines have a strong track record and should perform well in the future.
Those who love to drink fine wine may have heard of top wine critics like Robert Parker, Antonio Galloni, and Lisa Perotti-Brown, whose reviews can provide another valuable source of information on what to buy. An exemplary score from one of these experts can also have a dramatic effect on pricing.
An excellent example is Robert Parker’s revisit of the Mission Haut Brion 2005 which he upgraded from 98+ to 100 points in 2015. As a direct result of this announcement, the trade price leapt from £3,200 to £4,506 between January and June 2015 on the fine wine index Liv-ex.
Finally, Daniel Carnio recommends thinking outside the box, which is one of the trademarks of his fine wine investment company, OenoFuture. “For example, today China is making investment-grade wines like the Ao Yun by the LVMH group which is produced from high altitude vineyards in Yunnan province,” explains Carnio. “This wine has already proved to be very strong in terms of return on investment.”
Carnio also recommends investors consider regions in California, Spain, and Italy which are slowly but steadily gaining market share from the traditional collector’s favourite, Bordeaux.
As with any investment, Carnio recommends always doing your research thoroughly; “while you can experiment yourself, it really pays to have an expert pair of eyes to curate your portfolio and make sure you are maximising your returns”.
Choosing to work with a fine wine investment company gives you access to their extensive knowledge bank, insider analysis, and unique market access, making fine wine investment viable even to those dipping their toes into the world of wine.
Oeno specialises in sourcing the finest bottlings for private investment and trade. See oenofuture.com