Wine Knowledge | Investment

Investment

Bordeaux Index Wine Investment

Bordeaux Index Wine Investment is designed to bring the potential of the fine wine market to a broader investment community, enabling individuals and firms to take advantage of the significant capital gains and tax benefits available.

As one of the UK’s leading fine wine traders we are ideally positioned to assist clients to identify and acquire wines with the greatest potential to appreciate. We combine financial discipline, market insight and wine knowledge to optimise returns.

All portfolios are tailored to meet the specific risk appetite and investment horizon of the investor.

Summary of benefits

Introduction

Investment in wines is by no means a new activity. Those with expert knowledge of the wine trade and connections to the top chateaux of Bordeaux have been exploiting this sector for hundred of years. Over the last quarter of a century Fine Wines have proved to be one of the most consistently stable, high yielding, low risk investments in the world.

Out of over 4000 chateaux in Bordeaux, only the top 30-60 reach the standards we demand, for quality, underlying stability, limited availability, historical and forecasted investment growth. For a quality investment the wine must have a combination of brand repute, positive critical comment and a strong demand profile. Records going back over 250 years, show that Fine Wine has remained one of the steadiest forms of investment in the world, generally unaffected by stock market fluctuations and interest rate changes.

As for any asset class an investor should seek out expert advice before proceeding. We at Bordeaux Index, have 1st class investment advice to offer in addition to a complete service in the purchase, storage management and eventual sale of your Investment Portfolio.

Market

The fine wine market has in recent years witnessed a simultaneous growth in demand and reduction in supply. Demand has been driven by aspirant life-style choices, strong interest from new markets (China, Russia etc) and a sharp rise in the number of individual collectors. Supply in contrast has been held back by long-standing geographic restrictions imposed by governing authorities and wide spread reductions in yields as chateaux strive for greater quality. This dynamic has produced the conditions for handsome investment returns over past decades and bodes well for coming years.

The adage of buying the greatest wines from the greatest vintages is a useful starting point for an investment approach. The celebrated estate of the Left Bank and the top domains of Pomerol and St.Emilion have experienced amongst the most consistent and significant price increases. One should not however ignore premium wines from Burgundy, the Rhone Valley and Italy which have also provided impressive recent returns.

In addition to capital appreciation wine investment can provide diversification benefits by virtue of a low correlation with both equity and bond markets. Bringing wine into a portfolio of investments can significantly reduce total risk whilst providing strong upside potential.

Investment Approach

The investment objective of the Bordeaux Index Structured Investment Plan is to provide annual double-digit capital appreciation by investing in fine wines from around the world but with a strong emphasis on the top Chateaux of Bordeaux.

Investment decisions will be informed through a combination of specialist wine knowledge and formal financial market discipline. The Investment team has a proven track record of producing the kind of growth that makes the target return eminently achievable.

Investment choices will be informed by a number of selection techniques which will enhance returns and reduce risk:

Market Analysis – Comparisons of prices both for the same chateau within multiple vintages and multiple chateaux within the same vintage allow for the identification of overpriced and underpriced stock.

Market Awareness – Whilst the fine wine market has become more price-sensitive in recent years it remains highly imperfect. Access to an extensive and constantly up-dated ‘Bloomberg style’ trading screen allows the investment team to exploit price anomalies.

Wine knowledge – Although it is generally true that the judgment of a small number of professional commentators have a significant effect on prices, these critics often underrate and overrate wines initially and latterly adjustment their scores. Our experience and tasting ability allow us to independently judge the quality of the wine and thus influence investment decisions.

En primeur – Whilst Bordeaux Index believes that the greatest returns are to be achieved in the secondary market there are circumstances in which ‘futures’ purchases represent sound investments. Due to the heavy demand for en primeur allocations of prestige stock it is vital to have close relationships with suppliers.

Bordeaux Index Brokerage – As one of the main players in the London market Bordeaux Index is well placed to gather qualitative insight into the key trends and developments of the fine wine market.

Security of ownership

Wine will be purchased from sources throughout Europe within strict quality and provenance guidelines and will be stored in temperature controlled bonded warehouses in the UK.

The client will retain legal ownership of wines at all times.

Wine will be sold to end users, merchants and other investors globally. Both buying and selling will be realized through exploiting Bordeaux Index’s extensive network of trade and retail contacts and, where appropriate, through public auction.

There is no minimum investment period but we would recommend that the investment is approached with a minimum 3 year horizon.

Tax status

Wine is classified by Revenue and Customs as Capital Gains Tax exempt. Similarly, as long as formal ‘trading’ is avoided investment profits are not subject to income tax.

Disposal of wine

As with any investment there will be an optimum time when you would want your money to mature, to meet the personal costs.

If the market is trading high on a particular wine you own, we will write or telephone to inform you of the increase in value, with any recommendations to sell and replace with a younger vintage at a lower price, thereby increasing your stock and protecting your original capital outlay. As the wines belong to you at all times we will need signatures from yourself or your beneficiaries to carry out the sale; unless you would like to take advantage of our discretionary management service, particularly convenient for those who travel frequently.

Unlike almost all other investments, there are no penalty charges for an early encashment; we do however recommend a minimum investment period of three years.

Reporting

You will receive a detailed six-monthly valuation (see attached example) and newsletters, keeping you abreast of current market conditions and ongoing prices.

Disclaimer

Past performance should not be construed as a guarantee of future performance and the value of such an investment may fall as well as rise. Care should be taken in making an investment of this nature.