Wine Investment Guide Investing in the world s finest wines is no flash in the pan, the press have been raving about the benefits of the fine wine market for years but recent market developments and increasing global demand paired with global financial uncertainty, and the looming Brexit have resulted in many people using fine wine as an area for capital growth. The world s best wines are produced in limited quantities and improve in quality with age. Their value can rise over time as demand begins to outstrip supply and buyers start to hunt down the very best vintages. There are several tax advantages to be gained from investing in fine wines. HMRC classify most fine wine as a wasting asset making it possible to negate Capital Gains Tax liabilities. This rule does not apply to traders, so it is important to ensure that you only sell your wines at occasional intervals. Fine wine is also exempt from Duty and VAT as your wines will be stored in a government regulated bonded warehouse and as a wine portfolio does not generate an income stream it is also free from Income Tax. As with most investments the fine wine market does have risks. The market is not regulated by the Financial Conduct Authority (FCA) and is not covered by the Investors Compensation Scheme. The unregulated environment does tend to attract fraudulent activity but there are certain steps you can take to avoid any pitfalls. Its important to work with a broker or merchant that is recognised within the industry, sources its wines from established suppliers and ideally is a member of certain trade bodies and organisations. Cult & Boutique are members of the London International Vintners Exchange (Liv-ex). Liv-ex set up the world s first online fine wine exchange in 2000 making it possible to buy and sell wines at the touch of a button and publish the wine market s leading benchmarks Liv-ex 100 & Liv-ex 50. Applicants are vetted closely before being granted membership and access to their live exchange can offer a hassle free and fully transparent exit strategy. We are also members of the London Chambers of Commerce and Industry which enables us to arrange the export of our clients wines for sale overseas. The price of fine wine in Asia and the USA can be considerably higher than that of the UK, so offering access to those key markets can be invaluable to investors. At Cult & Boutique we provide a fully managed service from start to finish and can offer you access to a market that the Financial Times has recently heralded as one of the best performing asset classes of the past 20 years. But how does it work? Discover the world of fine wine investment with Cult and Boutique. Whether you re a connoisseur or newcomer, Cult and Boutique will help you navigate this progressive, alternative market The Guardian Food & Drink, July 2016
1. The Basics Fine wine has been traded as an asset class for decades and revolves around the basic principles of supply and demand. As the very best wines age they improve in quality and also become harder to source. Paired with an increasing global demand, fine wine has a history of consistent, tax efficient capital growth. Our dedicated team have the knowledge and experience to show you the very best that the market has to offer. 2. Set your budget It s important to decide upon a budget that suits you. We would recommend between 5,000-10,000 as a starting point but, as with many other markets, the more you have to work with the greater choice you have when it comes to selecting which products to enter the market with. 3. Select your wine We have a strict selection process and only work with wines classed as Outstanding by the world s leading wine critics. We have a great team of Portfolio Managers that can assist you in selecting the right wine based upon your requirements. We always ensure the wines we recommend are produced in very limited quantities and have the longevity to be stored for decades. Alternatively, if you have a specific wine or vintage you would like in your portfolio we will be happy to acquire it on your behalf. 4. Professionally Stored & Insured The wine market is a medium to long-term market and you should plan for your wine to be stored for five years or longer in order for the wine to mature adequately and for the supply and demand nature of the market to take effect. We use London City Bond s Vinotheque facility to store all our clients wines. Vinotheque is the UK s leading government regulated bonded warehouse, dedicated to storing fine wine. Vinotheque will ensure that your wines are kept at the right temperature and humidity to maintain their immaculate condition and all wines are fully insured at replacement value whilst in storage. If you would like to visit the bonded warehouse before becoming a client we would be more than happy to arrange a tour. 5. Performance Monitoring Once your wines are safely stored you ll be assigned a dedicated account manager and be issued with login details to your own private online portal within our website. When logged in you will have access to independent valuations, stock reports, fine wine information and also our bi-monthly client newsletters. We can also help you to expand your portfolio with wines from varying vintages and regions to create a strategic, diverse collection that is tailor made to suit you. In fact, recent market data has proven that a varied portfolio can provide a more consistent level of growth over time. 6. Realising your investment When you are ready to sell your wine we will act as your agents. We have various exit strategies available from online trading platforms to live auctions, peer-to-peer trading or a brokered sale. We can help you decide which option best suits your needs and will always aim to achieve the best possible price on your behalf. As members of Liv-ex and the London Chambers of Commerce and Industry we are able to arrange the sale of your wine here in the UK or overseas.
Case Study 1 Chateau Mouton Rothschild 2000 Chateau Mouton Rothschild was promoted to the top category of Bordeaux fine wine in 1973 to join Chateaux Lafite Rothschild, Latour, Haut Brion and Margaux as a Premier Cru Classe wine, or First Growth. These wines represent the Blue Chip sector of the market and are often used as a first step toward building a portfolio. Released in 2001, this vintage of Mouton Rothschild has been one of the best performers in the market. Its value has grown by over 560% over the last 15 years from an initial release price of 2,000 to over 14,700 today*. Over the same period traditional areas of investment have not managed to keep pace, with Gold gaining 205% and the FTSE showing only 30%*. As the table below demonstrates, the value of Masseto 2001 grew by 436% in the first five years following its release in 2004*. Over ten years this figure grew to 593% and to date, twelve years from release, has achieved an impressive 631%*. This equates to a compound annual growth rate of over 50% but the most important point shown in the table is the value of regional diversification. If you compare the price performance of Masseto 2001 with Mouton Rothschild 2000 above you will see that when the Bordeaux market dipped in 2011 this was not echoed in the premium Italian market. With leading wine critics predicting the lifespan of this wine to reach as far as 2050 there are years of growth left ahead for medium to long-term strategies. * Source: Liv-ex, October 2016
Case Study 2 Tenuta dell Ornellaia Masseto 2001 Diversification is key within the wine market and one of our strengths at Cult & Boutique is the wide range of fine wines we offer, not only from France but from the best wine producing regions around the world. A great example of performance from outside of France is the Tenuta dell Ornellaia Masseto 2001. One of a small group of wines collectively known as Super Tuscans hailing from Northern Italy. Masseto has built up a formidable reputation for quality and finesse which has translated into solid financial growth over the last decade. As the table below demonstrates, the value of Masseto 2001 grew by 436% in the first five years following its release in 2004. Over ten years this figure grew to 593% and to date, twelve years from release, has achieved an impressive 631%. This equates to a compound annual growth rate of over 50% but the most important point shown in the table is the value of regional diversification. If you compare the price performance of Masseto 2001 with Mouton Rothschild 2000 you will see that when the Bordeaux market dipped in 2011 this was not echoed in the premium Italian market.
The fine wine market has broadened a great deal over the last decade to include wines from a wide ranging list of countries and regions. In a similar way to equities, the fine wine market benefits from a portfolio approach, meaning the best way to reduce volatility and protect against over exposure is to build a portfolio of the world s best wines from a variety of respected regions. This is something that Cult & Boutique specialise in and we would be happy to discuss how this approach could benefit your overall investment portfolio. If you require further information or would like to discuss how to get involved contact us now on 0208 948 9430 to request a copy of our full brochure. Disclosure Wine investment should be both profitable and enjoyable but as with any form of trading in commodities, risks will be involved and wine is no exception. The value of wine can go down as well as up. The wine market in the UK is not subject to regulation of the Financial Conduct Authority. Registered in England and Wales number: 7178818