A bottle of good wine can be a balm for the soul and lifter of spirits. for investors struggling to find a good source of returns in a world of ultra-low interest rates, it can also be a compelling haven asset. although it carries no yield, fine wine does offer the potential for capital growth. it is not a tipple for the impatient, however. like the finest bordeaux or burgundy, the richer rewards go to those who let their wine investments age.
The industrys leading benchmark, the liv-ex fine wine 100 index, has barely budged of late, rising just 1.2 per cent for the year to the end of august. coronavirus, us tariffs on european wines and unrest in hong kong, the centre of the asian wine trade, have put a cork on gains.
But underscoring the steady nature of the asset class, the liv-ex fine wine 100 index, which charts the price movements of 100 leading fine wines on the secondary market, fell only 1.1 per cent between february and march. during this time, the s&p 500 plunged more than a third.
Longer term, the index, which is denominated in sterling, has also fared well, returning nearly 27 per cent over five years. that is better than the total returns on long-term uk gilts, or the ftse all-share index, over that period. even better, there are no uk capital gains tax on fine wine.
The trends are also looking up. at home wine consumption has soared during lockdown as people unwind with a glass of wine to cope with the stress of covid-19. since march, us retail wine sales or those sold at liquor, grocery and convenience stores are up a quarter, according to nielsen.
As the rich get richer thanks to the stock market recovery, the top end of the wine market stands to benefit. the liv-ex fine wine 100 index, whose constituents include bottles of 2005 lafite and 2000 latour, has risen for three consecutive months. a broader index, the liv-ex 1000, also saw a similar bounce back.
Beaten-down sterling could also act as a driver for future gains. fine wine merchants in the secondary market are predominantly based in london and the market is traded in sterling. the pounds 5 per cent drop against the dollar this month and its 8.5 per cent retreat against the euro since mid-february may be the nudge foreign buyers need to restock their wine cellars.
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