Fine wine investment market bounces back after small dip in July, latest figures show

Written by Ray Clancy

Tuesday, 14 September 2010 10:49

The fine wine investment market has recovered from a small dip in prices seen in July caused by the usually subdued market at the time of year.

The slight fall in July, the first in sixteen months had raised the prospect that the market was turning, but August figures show it was just a blip, according to experts.

The Liv-ex 100 was up +0.9% and the Claret Chip was also up +1.6%, up 27% and 35% respectively, year to date. This compares with a fall in the FTSE 100 of 3% YTD.

The Wine Investment Fund (TWIF) said the July figures were probably a blip, caused by the usually subdued market at that time of year, coupled with sales by major merchants and the falling away of the impetus given to the market by the high 2009 en primeur prices.

TWIF, however, considers it is still too early to be sure, as August has been another quiet month, characterised by lower than usual volumes and higher spreads. Their sense is that those market participants who were active, and many were not, were buying only when they had already sold on the wine, rather than to increase stocks.

There were some movements in prices. Château Lafite was in the middle of the pack, with performances ranging depending on vintage from -2.6% (1996) to +5.7% (1995). Latour was similar, again with a strong showing from the 1995, and also the 2004 (+9.3%). Margaux and Mouton fell on average by around 1.5-2.0%. Margaux performed slightly the worse of the two (in contrast to Lafite and Latour, the 1995 Margaux was down around 5%).

For a change Haut Brion was relatively strong. This Château has been a consistent underperformer in the rising market. From the end of December 2008 to end July 2010, a basket of Haut Brion vintages rose in price by around 23%, compared to around 33% for Margaux (the next weakest), 40% for Latour, 49% for Mouton and 113% for Lafite.

‘The quality of Haut Brion is unquestioned. It can only be a matter of time before the gap in prices to the other first growths begins to close,’ said Andrew della Casa, director at TWIF.

During August prices for Haut Brion increased around 2.5%, largely thanks to a very strong performance by the 1990 (+9.5%).

On the Bordeaux right bank, Cheval Blanc remained broadly flat. Pétrus and Ausone both rose, but with low volumes of trade in what are small production wines, these results are of less significance.

‘It is still difficult to be clear about the short term direction of the market. At the moment we take the bounce back in August to be a positive indicator, and on that basis believe that growth for the remainder of the year might average around 1.5 to 2% per month.’ added della Casa.

China continues to be a key to the health of the fine wine market. The indications that the Chinese government’s efforts to achieve a controlled slowing down in the rate of growth have so far been successful. This is seen as positive for the fine wine market, as this reduces the chances of a marked slowdown from China in demand for fine wines and increases the chances of sustained, steady growth.

TWIF’s performance in August was +0.01%, a slight underperformance of the market in contrast to last month’s outperformance. Year to date performance is 22% and year on year performance is 28%.

The Fund aims to generate double-digit returns. Since launch in 2003, it has produced an average annualised return over all its portfolios of over 15%, after all fees and expenses. Minimum investment is £10,000 for this five year investment.

All wine bought for the Fund is held in UK government bonded warehouses in ideal conditions for maturing fine wine and subject to the highest security. As bonded goods, the Fund’s wines do not attract VAT or duty under UK tax rules.