Is wine worth a punt?

Up 9.5% over 12 months, the Liv-ex 100 Fine Wine Index (below) has clawed back some of last year’s losses, when the industry’s main benchmark index fell 14.6% in 2008. So should you be piling into the fine wine market?

Probably not. First off, new Asian buyers and a “whole pile of Johnny-come-lately types” are fuelling current demand. A six-litre bottle of Château Pétrus 1982 recently sold for a record £60,000 at auction in Hong Kong, a city where wine imports rose by more than 40% in the first eight months of the year.

Meanwhile, in Christie’s spring 2009 global sales, Asian and Chinese buyers accounted for 61% of the total sale value, compared to 7% in 2005. “With demand coming almost entirely from Asian buyers, and with that demand so heavily biased towards one particular producer, it would be wrong to start heralding the return of a bull market”, say the people over at the Vintage wine fund.

Asia is beginning to resemble Japan in the late 1980s, when cash-flush companies and property developers splurged on trophy works by artists such as Van Gogh.

 

But there’s another reason why wine just isn’t such a great investment. Yes, it’s true, the price of ‘blue chip’ wines should increase with age. After all, the volume remains limited. The number of bottles of a certain ‘brand’ – say, Château Mouton Rothschild 1998 – will only decrease after harvest. However, if you are storing it, you’ll need a cellar with carefully monitored humidity and temperature levels. And when it comes to selling the stuff, you often end up turning to the broker who you originally bought it off to do so. That doesn’t sound like a great idea.

Of course, you can plump for a wine fund such as the Wine Investment Fund, which is currently taking subscriptions for a new tranche at a minimum investment of £10,000. But we have never been a fan of large fees. And the hedge fund-like subscription fees of 5%, followed by a 20% performance fee charged at maturity, means you would have to be exceedingly bullish on the market if you were to plump for it.