Wealth and Fine Wine Fund

Investment Objective and Overview

The fund provides exposure to the best investment grade wines in the world using the ‘fund of funds’ model. Investors enjoy diversity to traditional asset classes and the opportunity for non-correlated growth.

The balance of portfolio weightings is decided by an advisory committee that includes the notable sommelier and author Bryan Julyan MS FHCIMA , LCG and the management team at Wine Asset Managers LLP, led by Miles Davis.

Investment Strategy

Capital appreciation is sought through the ownership and trading of fine wines. The majority of the wines held within the underlying funds are red wines, principally from Bordeaux region of France although wines of other types and regions may be included from time to time.

The fund of fund approach allows the fund mangers the latitude to adjust the overall balance of the holdings without having to deal with the liquidity issues that affect directly held wine portfolios. A small cash holding is maintained to add further liquidity.

Key Features & Benefits

• Fund combines the world’s best fine wine funds
• Portfolio includes top performing funds currently closed to new investors
• Advisory panel of world renowned experts
• Low correlation to traditional asset classes

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Bringing Fine Wine Investment into the Public Domain

There is a romantic notion about wine investment, which is that you can buy two cases of young wine so that, after a period of maturation, you can drink one and sell the other to finance the purchase of another two cases. This self-perpetuating policy may allow some wine enthusiasts to drink ‘for free’. The fallback position of those who hold this view is that if values don’t rise as expected, they can always drink the whole stock. Sadly, though, it’s not much of an investment policy.

Interest in fine wine has been growing in the traditional markets of Europe and North America (which underpin the market for fine wines) and the emerging markets of Russia, India and China. The price of ‘blue-chip’ wines will increase with demand, yet volume remains finite: from their harvest date, the quantity of these wines can only decrease – sometimes at remarkable rates – especially when a wine is ready to drink.

While owning the physical stock of such blue-chip wines can give great returns, for investment purposes that’s not enough in itself. The key questions remain ‘what to buy?’, ‘where to store the wine?’ and, most importantly, ‘how much to pay?’ It seems that most wine investors to date have settled for so-called ‘investment advice’ from wine merchants who offer to put investors’ money into wines that the merchant already owns. This means that the investor pays the merchant’s margin in the price. Such advice may be given honestly, but it doesn’t ensure the best price is achieved – which is the key to investing in wine. Price determines the time it takes to make a decent return.

A lot of great wines sit on lengthy price plateau during periods of maturation. Often, this has to do with whether or not the wines are being written about. For example, whilst the 2003 Bordeaux was being shipped to clients it was reassessed by the critics. The effect was an increase in sales of the 2003 vintage and subsequently an increase in price of those wines that critics felt were of greater quality than they had previously considered during their En-primeur (i.e. pre-bottling) stage. Therefore, from an investment point of view, why tie up your capital during a price plateau?

However, what if you manage to acquire wines at such a high price and the next harvest produces an equal, or better, quality vintage? I believe securing a stock of great wines early will ultimately produce terrific returns. It is purely that the time scale is debatable. Investors have rarely been offered wine portfolios managed by truly independent fund managers and there have been very few pure wine investment funds, but some are now opening. And as wine becomes a viable asset class, more funds are likely to become available with variable risk levels.

Liv-ex (the international wine exchange) has included its index of 100 investment grade wines on Bloomberg Indices (which quotes indices of the world’s main investment markets). Therefore, whatever our individual feelings about wine are, financial markets are now being provided with performance data bringing fine wine into the public domain as a viable, and sustainable, vehicle for capital growth.

This article was originally written by Peter Lunzer who is director and wine adviser for The Wine Investment Fund The content has been edited for inclusion purposes.

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