Fine Wine in an Asset Class of its Own

Château Mouton Rothschild was the star performer in the fine wine market during October as some Asian buyers moved their allegiance from their former Bordeaux of choice, Chateau Lafite.

Asia is still leading the demand for investment quality wines but the traditional markets of America and Europe are showing signs of recovery. There were some extremely strong results produced by global wine auctions including the sale for £60,000 in Hong Kong of one impériale of Pétrus 1982, which is a single bottle containing six litres of the wine.

Fine wine prices are now up by an average of 14-18% since the beginning of the year.  This healthy increase has been achieved with minimal volatility.  Nine out of the ten months have been positive, with just one small (-1.2%) negative figure in March.  With only two months to go the fine wine market is on track to deliver returns of 16-20% in 2009.

Fine wine is providing continued stability when other asset classes are still suffering volatility.  The Sharpe ratio demonstrates that fine wine is outperforming other investments on a risk adjusted basis.  The first reliable monthly records for fine wine prices began in 1993 and since then prices have risen more than tenfold - giving an annual return of 15% according to the Fine Wines Investables Index produced by Liv-ex, the fine wine exchange.  Over the same period gold has risen less than three times at an annual rate of 7%.  Fine wine prices have even kept pace with the gold price this year despite its recent surge to around $1,050 an ounce.

“Fine wine has shown significantly lower volatility than gold during most of the period from 1993 and the relatively small 2008 decline in fine wine prices in unparalleled economic conditions has already been more than been made up in 2009,” said Andrew della Casa, Director of The Wine Investment Fund.  “Our own portfolios have generated average returns of 2.3% in October alone.”