Wine as a Viable Alternative Asset Investment

GrapevineMy professional career has been spent in finance dealing with structured transactions and financial investments. Fifteen years ago my love for all things wine drove me to become a wine writer and educator. I never imagined that the two worlds would cross. In short, I never imagined that my profession and hobby could merge at the intersection of evaluating investment alternatives and monetizing (liquid) assets.

In the midst of the current ongoing global economic turmoil, investors are looking for a safe haven for their investments. After being hit hard in the past year, many investors are looking for counter- or perhaps non-cyclical alternatives to the current structure of equity and bond markets.

The average investor has limited opportunities for alternative investments and long-term strategies. But wealthy investors are flocking to what has come to be recognized as a safe global investment vehicle.

Like this column, this global marketplace is also wine-centric. I’m talking about the “fine wine” market, the world of fine wine buying in the thin air of brokers, auction houses, exchangeable trading markets and even commoditized investment funds. It revolves around expensive and rare French Bordeaux and Burgundy products.

The market values ​​of these wines (some of which are over 50 years old) have consistently appreciated in value through the peaks and troughs of traditional investment cycles. At a market reminiscent of the Dutch tulip boom of the 17th centuryth Skeptics may discount an investment fund focused on French Bordeaux wines at typical prices of $150 to $500 (and much higher), but fine wine prices are past history. Averaged double-digit annualized returns over 10 years.

While most wine consumers buy wine on a need/wish basis, wealthy wine buyers are speculating on wine for potential capital gains. Global wine consumption is becoming polarized. The average person’s ‘liquidity’ has become the wealthy investor’s ‘long-term investment’.

As with any asset class, wine pedigree matters. Low-priced wines can be purchased at a lower price with lower returns, but may mitigate the loss of principal inherent in other asset classes.

At the macro level, the evidence is compelling. The Nasdaq Composite Index saw him drop more than 30% in 2022, while the Liv-ex 100 Fine Wine Index (yes, quants can create any form of index you can imagine) dropped to 7 in the same period. % has risen. Even in the darkest hours of the Great Recession, the index suffered short-term damage of just 15%.

Another big factor is the ease of access to the product. In the old days (25 years ago), many wines were exchanged directly between consumers or through specialized retailers. Today, international wine auction houses and internet purchases dominate the market. And in an era of Wall Street ingenuity revived, there are several wine investment funds (think “red liquid” mutual funds).

At the micro level, the laws of supply and demand govern. As an example, the price of a bottle of 1990 French Burgundy Domaine de la Romanée-Conti sold for less than $100 upon release. It recently sold for $21,200.

Another unique aspect of this market is pre-issue sales. Investors have started buying 2019 Bordeaux Fine Wine futures for wines not released until the fall of 2023.

Being a high-end investor has its downsides. Fine wine has become a commodity. It is not an agricultural product meant to be consumed and savored, but a graceful commodity meant to satisfy the ego. I think it’s a liquidity crisis.

Note: This column should not be considered investment advice. I am not licensed to provide investment (or other) advice of any kind. And yes, past performance is no guarantee of future results. Just ask my training instructor.

Nick Antonaccio has lived in Pleasantville for 45 years. For over 25 years he has been wine tasting and giving lectures. Nick is a member and Program Director of the Wine Media Guild of Wine Journalists. He also offers personalized wine tastings and wine travel services. Nick’s mantra: Continuous experimentation leads to instinctive can contact him Or on Twitter @sharingwine.

Nick AntonaccioNick Antonaccio

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