Liquid Gold

Also gaining popularity is wine investment: Some see it as a way of diversifying one’s portfolio as it is both inflation and recession resistant, while having low volatility as well as low correlation with the movements in traditional markets.

For example, Live-ex’s (London International Vintners Exchange) Champagne 50, Burgundy 150 and California 50 indices returned by 47.3%, 38.2% and 33.1% respectively, over the last year, despite the uncertainty in the global economy.

However, investing in wine can be “particularly challenging” because it involves a certain degree of knowledge, Vincent Tan, wine director at French restaurant Odette, tells Options. “Since wine prices are largely dependent on supply and demand, consumer trends and personal preferences, it is not always easy to predict them for the purposes of investing.”

Tan also considers an investment grade wine to be one that is “amongst the best in its appellation, adding that the value of wine also increases when it is rare or difficult to obtain.

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Investors who are willing to put their money in wine are typically those with a long-standing interest in the asset class, says Britt Ng, head sommelier at the Shangri-La Group.

“They [tend to be] passionate about wine and are willing to take the time to educate themselves about what constitutes a good wine.”

Ng adds that the process of deciding on how to go about investing in wine can be very challenging for a non-oenophile because of the steep learning curve.

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Several factors need to be considered: Where to get a bottle of wine that reaps healthy returns in the long-term, which wines are likely to appreciate in value over time, how the wine should be stored to preserve its quality over a longer time horizon, and how long can the wine be kept for before it becomes undrinkable.

He adds that wines that are scarce or have a strong reputation are typically considered ‘blue chips’ in wine investments. Such wines include the Bordeaux First Growths or the reputable Burgundies, whose prices are usually high to begin with.

Even so, many investors put their money in them with the belief that the prices would keep increasing. Likening the wines to Google or Apple stocks, Ng says that they are a good choice for investors looking for stable returns, especially during volatile times.

Image credit: Unsplash

Wine investment made easy

Meanwhile, wine investment platform Vinovest is looking to break down this barrier so that investing can be more attainable, especially for retail investors. The platform allows “anyone with an internet connection” to invest in the finest wines from Bordeaux and Burgundy in France to Napa Valley in the US, says Vinovest CEO Anthony Zhang.

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A challenge facing most new investors is that the number of wine investment platforms are far and few between, unlike the stock exchange or cryptocurrency players which anyone can start trading on, at the swipe of a button on their smartphones. Many wine investors have built their portfolio of fine wines through referrals. “This is perhaps tied to the fact that a high initial capital investment is needed as the fixed costs of fine wine are high, so a substantial amount is needed to achieve economies of scale,” says Ng.

That is where Vinovest comes in. In The Edge Singapore’s inaugural Alternative Investments webchat held on Jan 24, Zhang said that technology is democratising the market, making wine investing no longer the domain for the ultra-rich. To get started on Vinovest, investors just need to have a minimum balance of US$1,000 ($1,365) on the platform. They can then invest in physical wine bottles, stocks, exchange traded funds (ETFs) or an actively managed fund that is benchmarked to the Liv-ex Fine Wine 1000 index and strategies customised around a time horizon or ESG (environment, social and governance) preferences.

When asked how the platform selects the wine bottles, stocks or ETFs it offers, Zhang says that a range of factors are considered, adding: “Obviously, a strong track record of appreciation is essential.” Other factors considered include vintage quality, terroir, brand cachet, critic scores, consumer tastes, ageing window and market liquidity. “We weigh these factors based on an investor’s
risk tolerance.”

For instance, a conservative wine inves- tor would want proven brands and vintages such as wines in well-established regions like Bordeaux and Burgundy. Meanwhile, someone looking for an up-and-coming wine with high risk and reward can lookout for those from Chile, Australia and even South Africa, adds Zhang.

Wines are matured in new oak barrels at Chateau Mouton Rothschild (Image credit: Adrian Khoo)

‘Own a piece of history’
He also observes that several investors have taken to investing in wine to own a piece of history, or to have access to the prestigious brand cachet. “Investing in a bottle of Screaming Eagle is like owning a piece of a Banksy painting on Masterworks or part of a Honus Wagner baseball card, Zhang says, adding that such investments allow one to be a part of an exclusive club.

Shangri-La Group’s Ng recommends that investors should do a bit of reading and research — on wine critic scores or magazine reviews — before putting their money in a wine. One of his top investment grade wines is the 2016 Sassicaia, which has a perfect score of 100 points from Robert Parker’s Wine Advocate. This is slated to elevate the perceived value of the wine and correspondingly, its price vis-à-vis that of other vintages with an average score of 95 to 97 points, adds Ng.

He also favours the 2015 Château Margâux, which comes in a limited-edition black bottle to commemorate the last vintage of its managing director Paul Pontallier before his passing. The latter is an iconic persona in the world of wines and Ng says “there is little doubt” that the “2015 Château Margaux will become a ‘museum wine’ in the future”. Both these wines are investment-worthy, as the 2015 Chateau Margaux had a return of 98.3% over the last five years, while the 2016 Sassicaia had returns of 52% in the last two years, Ng adds.

Odette’s Tan’s picks include the Rayas which he says is “arguably the best wine producer in Chateauneuf du Pape, France”. The wines there are known to be amongst the most elegant in the region and are known for their “full-bodied reds,” he says, adding that their production levels are minuscule. Still, they are highly sought after by wine lovers globally and this probably explains why the 2000 Rayas saw a return of 523.7% over the last five years.

Another of Tan’s picks is Jacques Selosse, a “wine of the brightest stars amongst the champagne producers in the world”. It is no wonder that the 1999 Jacques Selossee Blanc de Blancs saw a return of 374.9% over the last five years. While Selosse’s wines are “not necessarily everyone’s cup of tea, his unique style of champagne production and quality is unparalleled.”

While investing in wine has become more accessible with platforms like Vinovest, Zhang, Ng and Tan all agree that investors should always study the fundamentals before investing and spend only on what is best suited to their needs.

Château Lafite's circular cellar room was constructed under the supervision of architect Ricardo Bofill and inaugurated in 1987 (Image credit: Adrian Khoo)