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The Grapes Of Wealth

21st May 2018 David Carroll, Head of Strategy, Seven Investment Management

Investing in wine doesn’t need to be beyond anyone’s reach if they follow the right strategy  and, over the years, build up a portfolio that – when managed by experts – can deliver over the long term.  

It is also an asset that, as I pointed out in my recent article about classic cars, has risen in value alongside other ‘collectibles’ such as art, jewellery, rare books and stamps. And those returns – unlike the underlying investment – are quite solid. So Knight Frank’s Luxury Investment Index for 2017 flagged that fine wine delivered returns of 231% over a ten year period – and (as with cars) is ahead of many of the world’s major stockmarkets. They have risen due to their limited supply – after all there is only one Château Lafite, by way of an example – and the ultra-low interest rates of the last 10 years.

However, it’s also important to understand that as with any investments, past performance and prices are no guide to the future.  This is especially the case with wines where two aspects have changed. The first change is that the wine makers of the very best wines have started to exert more control over the supply (and therefore pricing) of their own wines.

Meanwhile, the world famous wine critic, Robert Parker, is taking a far less active role in the annual ‘en primeur’ marketing of new Bordeaux wines – the result of which is that many consumers may be more selective in what they purchase or reluctant to buy as much as they might have done previously. 

For me, the first step into the world of wine was in 2002 – actually the year I got married – when I bought wines from two vineyards in Bordeaux, Château Latour and Château Pichon Longueville Comtesse de Lalande. I bought these wines en primeur (newly produced) on the basis that they were wines which would last 20 or more years, and it was quite unlikely that I could afford to buy them in 20 years’ time when they were fully mature.

These investments were made on the back of research. As with any investment, I knew it was important to gain some knowledge of which wines to buy and who I was buying the wine from. The right bonded storage is also essential as it first means the wine will be stored correctly (and therefore will be able to be more easily sold), and also means that I won’t have to pay any export costs should my ultimate buyer be outside the UK. So, the highest fees you’d pay on such storage (£12 a case per year) are worth the price. 

The 2002 vintage was then supplemented with decent allocations of the excellent 2005, 2009 and 2010 vintages of the same wines, which now represent the bulk of my 900 to 1,000 bottle collection.

The rationale for so much French wine is firstly because I generally only buy wines that I would be happy to drink. But secondly, because those wines should make the best investment. The brand – given much of the relatively new wealth in Asia is still discovering European wines – and the backing by every wine investment expert support this trend. 

For those who feel Bordeaux is a little beyond their budgets, wines from Australia, Italy, New Zealand and Spain are also seen as more interesting to investors, given the hefty investment many winemakers have made into their vineyards in recent years, and the relatively lower prices compared to the equivalent wines from Bordeaux and Burgundy. However, wherever the wine is from, it is still important to pay for quality first and foremost.

The investment made by many vineyards in technology over recent years has gone a long way to ensure better quality and greater consistency across different vintages. The result of this is that some wines of younger vintages may be better than some of their older cousins.

Last but not least, new investors should make sure they are buying from a reputable buyer. The likes of Avery’s Berry Bros & Rudd, Farr Vintners and the Wine Society have all been in business for a very long time and have extensive inventory, knowledge and expertise which is essential given the ever increasing number of fake wine scandals occurring. There are also a good number of newer, regional based firms such as Lea & Sandeman, The Vinorium and Yapp Brothers, all of whom are only too happy to advise and assist in the purchase and storage of high quality wines.

And if I was buying for drinking? My recommendations include Egly Ouriet Blanc de Noirs, in my view a serious champagne; Songlines Shiraz from the ex-chief winemaker at Penfolds Grange; Dogpoint Chardonnay, which is easily as good as £60 white burgundy but cheaper because of its New Zealand heritage; and Anthill Farms’ Pinot Noir – one of the few US wines I have bought more than once! 

Seven Investment Management LLP is authorised and regulated by the Financial Conduct Authority and by the Jersey Financial Services Commission. Member of the London Stock Exchange. Registered office: 55 Bishopsgate, London EC2N 3AS. Registered in England and Wales No. OC378740.

 

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