Fine Wine - A Safe Investment?

Yahoo UK has an interesting article about the potential of investing in fine wine. The article notes that after the Brexit vote, many investors are looking at alternative investment opportunities, and many are looking at fine wine. The article notes that fine wine, along with watches, classic cars and are are all drawing interest from investors. Keep in mind there is a difference between collector and investor. The article notes that fine wine investing is thought to be a $4 billion category.

Yahoo UK reports
In these tough economic times, many have reached for a stiff drink.

As the post-Brexit wobble begins to show tangible effects, it seems investors are increasingly looking to put their money into alternative ventures, such as fine wines.

According to new research, one in four wealth managers believe the appetite for investing in fine wines will increase over the next 12 months as the uncertainty post-referendum continues to dog traditional asset classes.

Wine, along with other alternatives such as classic cars, watches and art, is now a booming alternative.

“The fall in sterling since the Brexit vote and the fact that fine wine is increasingly seen as a safe haven, has led to a surge in Asian buyers,” said a report by sector specialists Cult Wines.

“Our research also revealed that two in three intermediaries believe the fact that fine wine is an unregulated asset class is the key challenge affecting the growth in popularity among high net worth investors.”

The fine wines investment market is now thought to be worth in the region of $4 billion a year.

Cult Wines, which is headed by former BBC The Apprentice runner-up Tom Gearing, saw a spike of 106% in trade sales in the week following the Brexit vote.

The industry’s Liv-ex Fine Wine 100 benchmark is up almost 14% this year, far outstripping the FTSE-100 (9%) and the S&P 500.

As with other sectors, such as the London property market, the falling value of sterling is offering foreign investors, particularly those in the Far East and the US, a strong opportunity to cash in on Britain.

Its research among more than 100 independent financial advisers and wealth managers, Cult Wines said more than two in five cited attractive medium- to long-term returns in the wines sector as a key driver, with one in five HNWI highlighting their belief that alternative physical assets such as wine will grow over the next two years.

“Intermediaries are clearly seeing increased levels of interest in wine and in the light of market volatility and poor returns,” said Mr Gearing, managing director.

“It is being recognised as a genuine alternative asset class, providing significant diversification benefits from mainstream financial markets.
"Not only can the sector provide strong returns under expert guidance but it is an enjoyable, collectible, tangible asset that has an exciting future.”

Cult Wines, founded in 2007, now handles £30m-worth of portfolios for more than 1,800 clients across 55 countries.

It said half of Bordeaux’s finest wines went to Asia last year and Asia’s shared of the French export market has more than doubled in the past decade.

Mr Gearing said some potential investors remained wary of the fines wines market as it remained unregulated.

“There are also benefits of the market being unregulated,” he said. “It allows investors greater flexibility with regards to ownership and structuring as wine is an easily transferable asset, as well as offering tax benefits as it’s regarded as a wasting asset by HMRC.”

He highlighted that unlike classic cars, stamps and fine art, wines have a recognised market exchange and international auction market.

“It offers sufficient liquidity to investors looking for alternative sources of return,” he added.
Source: Yahoo UK 

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