1. 40 1 lnveslmentWeek 1 11 April 2011 www.investmentweek.co.uk www.lnvestmentweek.co.uk Investment Week 1 11 AJ:Jri1201 1 1 41
WINE WINE
TOP 10 WINES FROM UV~EX
ASIAG STASTE FOR FINE WINE
fts Asia's love affair with fine wine
FINE WINE INVESTABLES INDEX
lAFITE ROTHSCHILD
2 HAUT BRION
3 lAFITE ROTHSCHILD
Vintage Feb 11 Feb 10 %Change
2007 7,500 3,475 115.80
I
2004 3,450 1l60 96.00
1997 7,638 4,002 90.90
grows, Joanna Faith looks at how it is 4 MARGAUX 2004 3,800 2,012 88.90
affecting the asset class as awhole 5 HAUT BRION 2001 3,450 1,850 86.50
6 MCXJTONR01HSCHILD 1996 5,126 ' 2,750 86.40
The success of wine as an asset class is
hard to refute - the numbers speak for 7 MARGAUX 2001 3,775 2,050 84.10
themselves. 8 HAUT BRION 1996 3,975 2,212 79.70
At the end of March, the Liv-ex Fine
Wine 500 Index was up 2.61% from 9 LATOUR 1998 4,048 2,253 79.70
the previous month and had increased
23.84% year-on-year, while the Liv-ex 10 LATOUR 2007 4,250 2,385 78.20
Fine Wine 100 Index was up 34.26% year By 12-roonm perfllffllilrt:e. Source. Li~Ex
on year. .~~.-.e~-~~e. ~~~- 1.~~. Y~ ~~~~:. ~~j~f. i.~~!~~ .......... .. .... ... ... ..... ...................................................
With few asset classes currently deliv-
ering such attractive returns, the case 1~
for investing in wine is well versed: fine f
1JQ_ - llv-il.ICAneWI71ll100
wine prices are largely uncorrelated to - FTSE100
other asset classes; investors can see S&P600
~120
returns of up to 30% a year from some
bottles; and demand is exceeding supply.
A wave of demand from As ia - more !~ 100-1•4!:::-..;::::::::~~
:E
II
,
specifically China, whose love of luxury 8 80
products such as jewellery and designer
handbags, has been well documented- is ~
to thank for this new dynamic.
Five years ago the Chinese were hardly 40
buying any fine wine, according to Miles
Davis, partner at Wine Asset Managers, a
•Maroa Sep08 Mar 09 Sep 09 Mar10 Sep 10 Man I
Source· LN-Ex
specialist manager of wine funds.
The impact since they started buying gauge by which investors will jump on a Meanwhile, Paula Golding of Premier
wine three years ago has been so signifi- momentum trade. Cru Fine Wine Investments says if Ch ina
cant that Davis attributes 36% annual "Given credit growth of 20% in China fell out of love with the commodity, only
returns from his funds last year to the and uncomfortably high inflation, these certain wines whose prices the Asia
maturing China momentum trades are likely to be called market. has pushed up, would fall.
market. into question as the Asian credit cycle The price of Chateau Lafite, for
"Our average long- turns." example, has escalated, she says.
term performance Meanwhile, Gary Boom, managing "Before Asia exploded into the
has been mid-teens;
normally you would
"Historically, Europe has been director, of Bordeaux Index, a trader of market, Lafite was a blue-chip wine but
fine wines, says one of the biggest risks now it is no longer low risk thanks to an
expect to see 15% the more knowledgeable market to the wine industry is if "China goes incredible marketing campaign which
a year. So 36% was into meltdown". has seen prices go up."
a very good year. but over the last 10 years Asian However, Davis says despite certain Wines from the Lafite est ate have
Without the Chinese economic headwinds, wine demand from surged by 124% since December 2008.
it would have been a
markets have started enjoying the country is only set to rise especially Chateau Lafite changed the label for
much lower number," and appreciating wine" among its half a million millionaires. the first time , for 2008 bottles, and
Davis says. "China's interest in wine has 01ily just included the Chinese symbol for 8 , a
David Roberts, Goedhuis & Co
However, jumping begun. The Chinese love brands. It is a lucky Chinese number. Overnight the
on the back of what brilliant way of demonst.rating wealth va lue of the wine increased by 20%.
some would describe and over the long time it will only grow," Golding says Europeans will now
as a momentum he says. have to pay a premium when buying the
trade, should be David Roberts of Goedhuis & Co, a wine.
approached with caution, according to fine wine merchant, agrees. "The popu- "There is only so much Lafite 2000 in
Mark Pignatelli, manager of the Euro- larity of wine in Asia is a new phenom- the world and when it has been drunk,
pean Growth fund at Smith & Wil- enon. Historically, Europe has been the it is gone. Asians are drinking it much
liamson. more knowledgeable market but over the younger which means when Europe is
He says since the Lehman debacle last 10 years Asian markets have started ready it will have to pay a premium as
there has been a greater than 90% corre- enjoying and appreciating wine." there is not enough around."
lation between the Fine Wine index and He notes the difference between the two However, Golding says the Asia boom
the following assets classes: copper, gold, cultures: in Europe, appreciation comes has not sent all prices through the roof.
the Thai stock exchange and the share with age. "People mature and store their For example prices of Margaux and
WINE 40-41 prices of Louis Vuitton and Volkswagen. wine." In Asia, people drink it with friends Latour have not been pushed up as much.
"The fact they have all performed in as a way of demonstrating wealth. The result of Asia's entrance is that.
THE BIG exactly the same way might at first sight While wine is being consumed in Asia portfolio diversification is more impor-
QUESTION 42-44 seem odd as there is not anything obvi- "at a rate never seen before", Roberts tant than ever. "Top of the market. is
ously linking the price of copper and notes supply over the last 15 years has high risk because of prices," she says.
INVESTMENT the fortunes of Thai companies with the gone down because the greatest estates "You'd need to balance out with some
TRUSTS e; world's drinking habits," he says. are more quality conscious than ever. 2010. You can't put. all your eggs in one
"The answer is that all liquidity (which "Fine wine 10 years ago was a rela- basket."
ETHICAL (] ultimately drives the risk premium on tively cheap commodity but because it Overall, she believes the entrance
GOLD 49-50 speculative assets) is coming from China. has become an important status symbol of Asia has had a positive effect. on the
"As such the real and perceived and replicas have entered the market, wine market. "While they are drinking
USA 52 wealth of the region is the principal prices have been driven up," he says. it we are making money on it."