Drink for thought – fine wine as an investment case

Bell Pottinger recently took a table at the annual NSPCC wine-tasting challenge. This is ostensibly a fund-raising event, and one which we are proud to support.

However, over the course of the evening, we were prompted to think about wine as an investment. There is a an old saying in the (very profitable) spirits industry – “God’s first miracle was when he invented wine; his second miracle will be when we make a profit from it”. But several recent trends suggest that fine wine might be more profitable than that suggests – even if not quite miraculous.

Fine wine is often described as an alternative investment asset class – alternative insofar as different to equities, gilts and various other products your IFA might recommend. It is also an asset class that has been performing well of late.

There is a growing market for fine wines, and like whiskeys and other luxury goods, it has done well in the economic crisis, being driven in particular by ultra-high net worth individuals in Russia and China. It also has the important advantage of being classed as a chattel – so investment in wine is exempt from capital gains tax.

As demand grows, the market has become more sophisticated – we now see a number of companies who will store it on behalf of investors, meaning they rarely even see it. Although even when stored in this way it still needs to be insured – and growing interest in the asset class has led to some instances of fraud, so being aware of best practice guidance is important.

But it does seem to be a market with a strong future – general knowledge about wine is rising and more people are becoming interested in the subtleties of different grapes and regions, and demand for tasting courses is growing. All of this should help to support prices at the high end of the market.

Investing in wine is not a quick bet – it should be seen as a long-term investment, probably a five year play if not longer. And, while clearly there are no dividends, in the worst case scenario, if valuations do not meet expectations, you can always just drink it!

To support the NSPCC, please click here.


Recent News