Investing in Wine 

Great wine is on the radar of the international elite in a way that it has not been before. Combine this with activity from several bespoke wine funds and significant interest from Russia, China and now India, and great wine presents some very interesting investment opportunities.
 
The principle is simple: demand for the truly great wines, which are made in extremely small quantity, vastly (and increasingly) exceeds supply, so prices rise. As the wines mature and are consumed, they become rarer and correspondingly more expensive.
 
As demand for fine wines worldwide has increased the appreciation of great wines has been seized on by consumers as an alternative to traditional investments like the stock market, property and bonds. John Armit has been advising clients on establishing wine investment portfolios since 1982, and works with our Private Client advisers to ensure that this service is a core strength of armit.
 For a personal consultation, please contact the Private Client Team on 020 7908 0660 or private@armit.co.uk.

 

Building a collection

The greatest wines, like all sought-after rarities are in short supply and great demand. Finding stock, let alone mature stock, can be a frustrating business. A well-managed cellar built up over time can bring enormous pleasure as well as rich rewards and the choice to either drink or sell.

Many wines are made to be enjoyed from the moment they are bottled however many more will develop and improve with age as well as having the potential to increase in value.

  

Why invest in wine?

  • Wine is an international commodity that attracts interest from around the world. armit has offices in London and Hong Kong, the world centres for trade.
  • There is a limited supply of the finest wines and over a period of time, demand exceeds supply and prices rise. The annual production of the top 10 Bordeaux wines is less than 100,000 cases. This is a tiny amount for a global audience. The equation is simple: as the wines mature and are consumed, they become rarer and correspondingly more expensive.
  • In addition to the traditional markets in Europe and the USA; Japan, Hong Kong and Malaysia have become important and China, Russia and now India are emergent markets. Inevitably, the consumption of great wine follows economic power.
  • If carefully selected and bought at the right time, wine has consistently outperformed other investment mediums. Between January 1988 and May 2009, the Compound Annual Growth Rate (CAGR) of wine as represented by the Liv-ex index stood at 12.6% and showed lower volatility than FTSE 100 and gold.
  • At the time of writing, wine is not currently subject to capital gains tax in the UK, being deemed a ‘wasting chattel’ by the Revenue.

Which wines to invest in?

  • Great Bordeaux have consistently provided satisfactory returns on investment – they are the most famous in the world and production is fi nite, defi ned by specific geographical areas. In good vintages the top wines can enjoy a minimum lifespan of 20 years, meaning there is plenty of potential to pick your moment to sell. The wines can also therefore be re-traded a number of times before consumption.
  • Over a period of time, demand exceeds supply and prices rise.
  • It is important to remember that great Bordeaux wines have a long life; in good vintages a minimum lifespan of 20 years is to be expected from the top wines.
  • The best vintages have always outperformed the rest. In the last 30 years these are 1982, 1986, 1989, 1990, 1996, 1998, 2000 and 2005. Initial investment should be concentrated on these vintages, but seeking value in less well regarded vintages is a sensible approach for more established portfolios.
  • Other wines, including great Burgundy, can offer price appreciation, but selection is even more critical and the right advice key.

How to invest in wine?

  • armit has been advising clients on establishing wine investment portfolios since 1982 and our team of dedicated account managers will happily discuss your individual requirements and advise you accordingly. Our service is bespoke. We work on a
    client by client basis, not a conglomerate fund, to reflect client interest and for the obvious tax advantages.
  • We have developed close relationships with some of the top producers from around the world which gives us access for clients to exclusive allocations of the finest wines for drinking and investing.
  • Regular fine wine offers are sent via e-mail and our ever changing Fine Wine List can be found on our website.

Buying En Primeur

“En Primeur” is a French wine trade term for wine which is sold as a ‘future’, i.e. before it is bottled – usually one or two years after the En Primeur offer.

The most important annual offerings come from Bordeaux, Burgundy, Italy and the Rhône. For many wines, and certainly for the most sought-after, the En Primeur price is the cheapest way of securing the wines you want. Customers pay the opening price as soon as the offer is made and the wine is then shipped 2-3 years later. Only once you have paid the additional costs of Duty and VAT, can you take delivery of your order, alternatively, you can store the wines with us, under bond.