‘High’ returns from wine :: Business Line

��

-->

Blue-chip wines like the Chateau Lafite Rothschild 1982 have significantly outperformed gold in the last 13 years.

With the rupee touching new lows, the stock market struggling to perform and uncertainty ruling the real estate market, shrewd investors are turning to alternative investments to secure their assets. Investment in fine wine is one such alternate investment.

But what is investment in wine and how is it profitable? Fine wine investments have been turning heads for the past 10 years and have just started to move into the mainstream now. According to data tracked by us (Bordeaux Traders, a fine wine investment brokerage), annual returns of 10-15 per cent are being achieved for investors dealing in global blue-chip wines.

These wines have outperformed global stock market indices. Certain stocks have even outperformed gold. But not every expensive fine wine will necessarily increase in value and investors need advice from expert wine brokers.

DEMAND-SUPPLY MISMATCH

The reason for staggering price increases in fine wine investments is limited supply and increasing global demand. Luxury wines have become status symbols for the rich. Not everyone can get their hands on these fine wines, because of their cost and limited availability. This is especially true of good vintages.

Here’s a simple comparison that many Indian investors will relate to. Let us compare the performance of gold with a top blue-chip wine, Chateau Lafite Rothschild 1982, over the past 12 years. As shown in the accompanying graph the Chateau Lafite Rothschild 1982 has significantly outperformed gold in the last 13 years.

To profit from returns such as these, Indian investors need to know how much luxury wine to add to their portfolios, when to buy and more importantly when to sell, as timing is everything in this new alternative investment market. It is interest from Indian investors that has prompted investment brokers such as Bordeaux Traders to open an office in India.

Heady returns from wine are attracting worldwide attention. Bloomberg now lists the Liv-Ex 100 Index, a blue-chip index for fine wines. This index can easily be tracked by investors themselves.

Fine wines, due to the nature of the market, have also become an official alternative investment. Like real estate, wine is also a tangible asset.

It is stress-free and hassle-free for investors because they do not have to store the wines nor are they interested in ever drinking them. The wines never need to travel all the way to India, but stay in Europe in temperature-controlled and air-conditioned storage conditions in bonded wine warehouses. Investors receive their certificates of ownership, just like with any other investment, and then hold on to achieve returns.

INDIAN MARKET

Since the returns have been higher than expected, Indian investors are moving large parts of their portfolios into fine wines.

We, however, do not recommend that investors move their entire portfolio into fine wines, but definitely a small part of it. When it comes to investments, diversification is crucial and fine wine investments offer an ideal diversification to increase profits and reduce risk.

Recent experience also shows that fine wines are a recession-proof investment. Indian investors have already begun taking advantage of this opportunity. With import taxes and tariffs being re-evaluated, India may eventually become a global fine wine hub, like Hong Kong has become since import tariffs were abolished in 2008.

(The author is CEO of Bordeaux Traders with offices in Vienna and Mumbai.)