With long rung returns of over 13% p.a. fine wine has outperformed almost every major financial index over the past two decades. This broad based price appreciation is founded on a basic dynamic of increasing international demand and fixed/finite supply. To make the most of these trends, we need to analyse market patterns and select wines well placed to benefit.
Supply and Demand Picture
As global wealth, particularly amongst High Net Worth individuals, expands, so the demand for finite luxuries increases. The phenomenal interest that we have witnessed in recent years from the Far East, and China in particular, remains at an early stage as interest and knowledge grows rapidly from a low base. At the same time, fine wine appreciation continues to be entrenched in the established markets of Europe and North America. It is not an overstatement to say that certain fine wine brands are well on their way to becoming truly international luxury goods.
The importance of supply-side issues to fine wine prices is often overlooked in favour of the dramatic expressions of the demand-side. Yet, such are the legal and structural inflexibilities of producing fine wine in classic wine regions that the reductions in production over the past 10+ years goes a long way to explain the price increases we have seen.
Stock selection is as important in fine wine investment as in any other. Blanket investment in the ‘best Châteaux’ or ‘best vintages’ will simply not produce optimal returns. Calico AM use an extensive set of tools - including relative pricing, flow analysis and release strategies - to better understand supply/ demand patterns and thus inform investment decisions. We firmly believe that the selection and maintenance of a wine portfolio should be subject to the same professional standards as for other valuable assets.
Our aim is not just to select a portfolio that will perform well, but to select one that is suited to your investment objectives.