Will your cellar mature in value as well as flavour?

Baroness Rothschild is head of one of the world's most famous wine estates. So it speaks volumes about the wine market that in June this year, the 72-year-old owner of Chteau Mouton Rothschild felt compelled to remind the world that wine is meant for drinking, not as "a speculative investment". Wine is being touted as an alternative investment as the new global elite try to find places to store their wealth. "But does the bottomless wealth spawned by globalisation promise a reassuring future for our wines or just a bubble of prosperity that could easily burst if one day those new buyers look elsewhere for the symbols of their success?"

Fears of a painful ending to the bull run in wine are nothing new. The Liv-Ex 100, a London-based international wine index that tracks the prices of around 70 big wine brands, is up almost 160% since July 2001, and more than 50% in the past 12 months alone. So who is buying all this wine? There are two main types of buyer. The first is hardly a new phenomenon. Wine has been a status symbol for centuries at banquets, the Romans gave different qualities of wine to people depending on their social standing. But whereas 2,000 years ago it was shown off on the banks of the Tigris and Euphrates, today it is in Moscow and Shanghai that the best wines are displayed. There, in the cellars of the richest houses, you're far more likely to find a first-growth wine (see below), such as Chteau Margaux, than you are a bust of Mao. At a recent auction in Zachys New York, where a half-case of 1974 Roederer Cristal Rose champagne (estimated at $1,000 to $3,000) went for $23,800, more than half the buyers were Asian.

The second group of big buyers are the wine funds launched in the last two years. They include London's Fine Wine Fund and the Wine Investment Fund, who have pumped more than $170m into the market between them. Investors in the Wine Investment fund must pay a 20% fee on any profits and, on top of that, a 1.5% management fee, and also have to commit to a minimum £10,000 investment for five years. But despite the costs, the funds mean that those who want to invest in wine no longer need the expertise to buy the right kind of wines, or the cellars to store it. And that widening of the market has also made it more volatile. That became evident in August and September, when the Liv-ex dropped 0.1% and 1.3% in succession, the first fall in almost a year and the biggest in more than three years. Much can be put down to seasonal factors, says Justin Gibbs of Liv-ex, as France kicks up its heels and goes on holiday. But he admits the credit crunch too was a factor. "The buyers didn't disappear. But the sellers had a greater urgency." He forecasts a flatter market in the coming months.

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Despite the falls, wine particularly those regarded traditionally as the finest wines is hardly sitting at bargain prices. A case of a good French vintage first growth will set you back about £8,000. Only a few years ago, it could be picked up for half that price, says Gibbs. There are five first growths: Chteau Lafite Rothschild, Chteau Latour, Chteau Margaux, Chteau Haut-Brion and Chteau Mouton Rothschild, which together make up 63.2% of the Liv-Ex index weighting. But the rise in the cost of these wines has pushed traditional buyers to look elsewhere, chiefly to second-, third-, and fourth-growth wines. "Lynch-Bages, the Chteau Palmers, these wines, is probably where the market will broaden to. And that's where I would be playing. I wouldn't necessarily be chasing the first growth at this point."

How do you value a classic' vintage?

In 1855, in response to Britain's Great Exhibition of 1851, the French held their own international exhibition, the Exposition Universelle, where they aimed to show off the best qualities and produce of the French nation. Inevitably, this included the country's Bordeaux wines. But with no ranking system in existence to differentiate between the different varieties and vintages, Emperor Napoleon III and the Gironde Chamber of Commerce requested one. The Bordeaux Wine Brokers' Union went to work and came up with the 1855 Classification System', which looked at the quality of a wine in terms of its selling price and the reputation of the Chateau that produced it. There were five ranks, going from first growth to fifth growth. These remain to this day the blue chip' wines favoured by investors.

But because the system remains pretty much unchanged to this day, it is heavily criticised by many in the wine industry not least Robert Parker. Considered by many the world's most influential wine critic, he has described the 1855 system as a historical legacy, which should be viewed in that context only. His opposition is perhaps unsurprising, because he has developed his own ranking system, called Parker points'. Marking wines out of 100, a wine's fortunes can rise or fall depending entirely on Parker's opinion of it.