This month we focus our French interests on one of the few asset classes which provided positive investment returns in 2022. Namely, the fine wine market. For insight, we turn to our friends and business partners at Cru Wine to for tips and a market update. The fine wine industry is increasingly cosmopolitan. However, it remains, for now, an asset dominated by French wines. French Wines drive the LIV-EX, they are to the wine industry what the S&P 500 is to global equity markets- the principal engine.
At Buisson Mondial, we seek to target different elements of the “French Connection”. Specifically:
French nationals returning at some point to France.
Investors who prefer to speak about investment in French.
Non-French nationals who might retire in France.
This month we remain firmly in French territory by focusing on one of the more famous French assets: fine wines. This month's content is provided by our friends at Cru Wine.
Hedge your bets with vines – Fine Wine remains a source of stability
Discover the best-kept secret in the alternative investment space. With low correlation to traditional equity markets, fine wine investment is soaring to new heights, as Gregory Swartberg CEO of Cru Wine explains…
During periods of inflation, gold has traditionally been viewed as a “safe hedge” but in 2022, fine wine outperformed several traditional equity markets, surging to record highs, as this alternative asset can bring stability during market crises. At Cru Wine, we believe and have seen for our clients, that fine wine forms an attractive long-term alternative asset that can play a valuable role in diversifying your investment portfolio. The main benefits include:
Solid returns
Low correlation to traditional assets
Downside protection with low volatility profile
Figure 1 – Liv-ex1 performance alongside other equities in 2022
Source: Pricing data from Liv-ex as of 11th January 2023
In 2022, fine wine has been stable in the face of increasingly severe headwinds. As a diminishing asset which encourages long-term storage, fine wine is an inherently low volatility investment. This gives it advantages over mainstream assets especially in turbulent economic times. In 2022 it proved its worth, with the Liv-ex Fine Wine 1000 hitting new highs with a +13.1% index performance, whilst S&P dropped by more than 17% over the same period.
“2022 was a great year for fine wine investors as our clients looked to diversify their holdings with a low-volatile and uncorrelated to the equities asset class,” commented Gregory Swartberg. “Champagne and Burgundy were extremely popular and drove this with a respective +27% and +19% performance for these regions.”
Some interesting insight was recently shared with the Financial Times by Swartberg last month, you can view the article here.
At Cru Wine, we are bullish about 2023 as fine wine continues to be seen as a great hedge versus inflation due to its unique agricultural characteristics, but also as we continue to see a greater demand for fine wine from both consumers and investors. Swartberg concludes, “We are particularly excited about the Rhone region and the upcoming release of the 2022 Bordeaux vintage in spring 2023, which we believe to be some of the best opportunities to look out for this year. It’s possible that we may not see the same levels of returns in the last two years, with Champagne and Burgundy being particularly strong. But skilled selection in individual wines can still deliver outperformance - and that’s what we offer our clients.”
So why are more and more investors looking to hedge their bets and diversify into the world of fine wine?
The underlying principle of investing in wine is that the quality and rarity of fine wine increases over time, and therefore, so does its value. A finite number of bottles are produced each vintage and over time, as the corks on these bottles are popped, the value of the remaining ones increase.
The fine wine market also has a track record of low volatility and providing protection in market downturns and diversification in sources of return. Fine wine has shown a 0.1 – 0.2 correlation to major indices over the last 20 years. This was shown during the largest market crises in recent decades, as fine wine performed relatively well and bounced back quickly during the global financial crisis and the Covid-19 outbreak.
Let’s take a look at a current case of fine wine – 1989 Château Haut-Brion, from Pessac-Léognan in Bordeaux. When this was first released from the Château the following summer, a case of 12 bottles was worth £360. Some 30 years later, that same case is worth over £29,000 – a return just shy of 8,000%. Had you put your money into major asset classes like Gold or FTSE 100, you’d only be looking at returns between 200-300%. Quite a difference.
At Cru Wine, we believe that fine wine can form a permanent component of a long-term investment portfolio with the potential to deliver positive returns through shifts in inflation and other economic downturns. Our philosophy is to provide a tailored approach to fine wine investment that is tailored to your needs and objectives, and we’ll build you a profitable wine portfolio that is forward-looking, diversified, and designed to deliver long-term returns.
Once your portfolio has been created and you’ve picked out your wines it’s time to sit back and relax, preferably with a glass or two of good claret, as fine wine needs patience but can richly reward. And that’s one of our favorite parts of building a collection of sought-after fine wines, the pleasure of popping a cork and savoring a wine you own with friends and loved ones is just as pleasurable as the financial benefits afforded from investing in them. A good vintage never changes, it just gets better with age.
Cru Wine is a passionate team of fine wine specialists who enrich the wine-buying, collecting, and drinking experience for wine lovers around the world. Find out more
1. The industry-leading benchmark which represents the price movement of the most sought-after fine wines on the secondary market
For further information contact natacha.reincastle@mondialdubai.com