THE WINE MARKET: IT’S NOT JUST ABOUT BORDEAUX
Tuesday, 1st August 2017
Burgundy, Super Tuscans and Cult Californian Wines are Catching Top Dollar
DIVERSIFYING YOUR CELLAR WITH INVESTMENT-QUALITY WINES
With an uncertain market climate, savvy investors are turning to unconventional investments in efforts to diversify their portfolio, minimize losses, and maximize gains. While some markets have cooled in the uncertain market climate, others have soared: the ultimate example being the Wine Market, which has demonstrated sizeable gains and resilience. According to Cult Wines, data compiled over the last thirty years shows that a £5,000 investment in the FTSE 100 in 1984 would now be worth £34,473; The same investment in 18 cases of Lafite Rothschild 1982 would be worth £698,832. Even on a broad scale, the Liv-ex 1000 closed in 2016 at a record high with gains of 22.3% over the course of the year.
While Bordeaux continues to perform strongly, other wine regions of the world are producing investment quality fine wines that have increased significantly in market prominence. In fact, the best performing sub-index of the Liv-ex 1000 is ‘Rest of the World 50’ (the ten most recently physical vintages for five wines from Spain, Portugal, the USA, and Australia) which increased over the last five years by a staggering 47.48%.
As a growing component of the tangible asset portfolio, wine cellars void of Bordeaux should not be overlooked. Due to market misconceptions, these areas represent the greatest potential for amplified risk exposure and oversight in effective portfolio management. High performing regions include Burgundy, Italy and California, as well as exploratory investment potential in South Africa and Australia, among others. Here are some top market performers to be aware of when assessing a cellar:
Bordeaux producers carry with them the prestige of an ironclad reputation established by consistent quality and cellaring potential–which interprets to strong long-term investment potential. Leading châteaux include familiar names such as Mouton-Rothschild, Margaux, Lafite-Rothschild, Haut Brion and Latour. These ‘First Growths’ routinely captivate international buyers at leading auction houses; In October 2016, Christie’s London auctioned eleven bottles of Latour 1945 for $43,217 and, more recently, a case of twelve bottles of Château Palmer 1961 sold for $33,476.
Burgundy, a region known for its superb red and white wines with a market driven by scarce quantity, producing only 25% the quantity of Bordeaux (excluding Beaujolais). Yet this small production has outperformed Bordeaux with the Liv-ex Burgundy 150 indicating a 44.3% increase over the last five years. Among the most renowned producers is Romanée-Conti. In 2014, Sotheby’s made headlines with the sale of a superlot comprised of 114 bottles of Romanée-Conti spanning from 1992 to 2010. The lot achieved a record-setting $1.6 million, calculating to $14,121 per bottle.
According to Wine Investments, select Italian wines are becoming increasingly prized as part of a well-rounded investment portfolio. In the last year alone, the Liv-ex Italy 100 has increased 18.26%, which coincides with increased interest as well as concerted efforts to increase Italian wine exports, up 17% in 2016. Fine wines with investment potential include producers in Piedmont and Tuscany, most notably the Super Tuscans, including vintages from the producers’ Sassicaia, Ornellaia, Masseto, Tignanello and Solaia. In today’s market, the legendary 1985 Sassicaia, often described as perfezionare, retails as high as $6,000 per bottle.
With the growing interest in fine wines from the New World, California is one of the largest producers with investment quality dominated by the ‘Cult Californian’ Wines. These wines are produced in extremely small volumes, have notable cellar-potential and routinely obtain high scores, thus driving the market to some of the highest values paid for wine. Leading California fine wines include Scarecrow, Harlan Estates and Screaming Eagle. In 2000, a single bottle of Screaming Eagle Cabernet 1992 raised a staggering $500,000 for charity, the sale of which still has yet to be beat.