By Q Wealth Platinum Member, Neville Blech
As reported in the Financial Times last month, worldwide demand for fine wine is beginning to pick up again.
Fine wine has been one of the best performing asset classes of the past 50 years, but in recent times prices have been volatile. The most liquid market, Bordeaux, whose vintages enjoyed a bumper period between 2005 and 2007, fell heavily in 2008 and again in 2011, when the Chinese bubble peaked and burst. Bordeaux received a big boost from Chinese demand following the abolition of import duties into Hong Kong and this drove prices up by 65% in the two years up to 2011.
Prices began to fall in 2011, after the 2009 and 2010 Bordeaux vintages were released en primeur, at prices which were too high and further fuelled by speculation. Economic problems in Europe compounded the slowdown in investment. Trading began to dry up which reinforced the downturn.
Wine Investment Funds such as Noble Cru in Luxembourg, got into severe financial difficulties in 2013 when the Luxembourg Courts forbade investors to withdraw their funds. However, they are still in existence with a portfolio that has not gone down in price since 2014.
Since the middle of 2014, conditions have improved. Demand from China is lower than before but has begun to pick up, as have trading conditions generally worldwide.
Over the past 10 years the long-term performance of wine investment has increased three times the increase in the value of the stock market and has also outperformed gold and oil as well as showing a low correlation to these assets, which means it provides portfolio diversification. Furthermore, whilst demand from China has lowered, investors have become more sophisticated. They are not confining their wine investments to Bordeaux; as they have discovered, there are other wine producing areas where substantial gains can be made.
As with all investments, timing is everything, but it looks as if market conditions are currently favourable. The market is up almost 5% over the last year, and with prices accelerating, we can expect another 5% over the next 6 months.
I was a little premature in trying to promote a Wine Investment Fund in 2013 and prices did dip subsequently. But as I said at the time, wine is a slow burner and investors must consider a minimum 5 year holding period in order to realise meaningful gains.
With prices now back to 2013 levels and on the up, it is time to reconsider this market again. Wine investment should be part of a balanced investment portfolio but to be prudent, I would not recommend this being more than 10% of your whole portfolio.
Some further do’s and don’ts in wine investing
Do buy wines from a reputable source
Do buy wines with scarcity value
Do enquire about storage conditions and, with regards to older wines, the level of ullage that might have occurred
Do make sure that the wines are recorded in your own name as proof of ownership at the place where they are stored
Don’t buy wines only from a single merchant – they will only recommend wines that they stock themselves.
Don’t buy wines from anyone cold calling you and promising you fantastic returns. There are some fantastic returns to be made – for them!
Don’t expect to make a fast buck (although it can happen on rare occasions)
Don’t trade frequently (only the brokers make money this way)
If you would like any personal advice on wine investing, (and drinking – that’s a different portfolio!) please contact me at email@example.com
Please check out Neville’s website WineBehindTheLabel.org
Qualified as a chartered accountant in 1959, Neville became passionate about food and wine whilst working in Italy in the early sixties.
There he encountered not only his future wife, Sonia, but also 2 litre bottles of “Valpollicella” made in a cantina in the back streets of Milan. He soon began to appreciate better quality wines, particularly French, and returning to London began building up his knowledge of wine with the help of Hugh Johnson. Wine and food soirées at the Blech’s South Kensington home became a regular feature and the purchase of a run-down pub in Wales as a second home in 1971 prompted them to consider commercialising Sonia’s abilities as an accomplished amateur cook. “Sonia, darling, you can cook a bit – let’s open a restaurant”. The pub was converted into a smart restaurant avec chambres, and opened in 1974, and in 1976, Sonia became the first woman chef in the UK to obtain a Michelin star.
Returning to London to open the Mijanou restaurant in 1980, which became one of the fashionable restaurants of the decade, the innovative wine list resulted in many awards, and soon he was being asked to write a wine column for a magazine called “Restaurant Business” (now defunct – but not his fault!) and to help other restaurateurs with the composition of their wine lists, a function he still carries out today. The consultancy developed and in 1989, started his own wine importing company, The Wine Treasury, which specialises in wines from California, being one of the first in the UK to realise the quality potential of Californian wines, some of which are now truly world class players.
The tail began to wag the dog, so in 1996 the restaurant was sold to concentrate on the wine business and the soirées re-appeared in a much more professional fashion with regular visiting wine producers as special guests. He continued to write occasional articles for various wine publications and broadcasted on wine for Jazz FM in London (also now defunct but not his fault either!) in order to make the distinction between Brubeck and Brunello. He has been a member of the Grand Jury Européen wine tasting panel and served on tasting panels for Decanter, Wine Magazine and other leading wine publications.
In 2002 he sold The Wine Treasury to concentrate on wine writing and wine consultancy and his involvement with Wine behind the label. He is currently a member of the Circle of Wine Writers organisation and FIJEV (Fédération Internationale des Journalistes et Écrivans du Vin.)