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The Case for Investment in fine wines.

The Case for Investment in fine wines.

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  • 1. THE CASE FOR WINE INVESTMENT? Web: www.antique-wine.com Tel: +44 (0) 20 3219 5588 Email: info@antique-wine.com Free from USA: +1 800 827 7153 UK Office: 53 Queen Anne Street From Hong Kong : +852 2850 557216/02/2012 London W1G 9JR Fax: +44 (0) 20 3219 5568 1
  • 2. Motives for Investment in Wine?• Diversification of Portfolio• Passion or interest in wine• Tax efficient• Supply/Demand Environment Liv-Ex 100 (Top 100 Investment wines) Vs FTSE 100 2
  • 3. Why AWC WineCap• Dedicated Investment Division within AWC Group• 45,000 Global Client database• Readily accessible to market• Market making capabilities• Huge sourcing capabilities• Ability to help build large Client positions discreetly• Efficient and cost effective on liquidation 3
  • 4. The Fine Wine Market Total global market for fine wine is just €2.95 billion annually:• UK wholesale and merchants - €475 million• Global Auctions - €300 million• Asia auctions - €120 million (40% of global total)• Le Place de Bordeaux (Bordeaux negociants) - €500 million to €1 billion, depending on the vintage 4
  • 5. Why does wine rise in value?• Increasing demand for fine wine – Emerging markets are only starting to drink wine – Global wealth is increasing• Limited production – Fine Wine Appellation areas are not extendible – 150 years old classification remains unchanged• Decreasing stocks – The older the wine, the less stock remains because people drink it 5
  • 6. Growing Markets •Abolition of taxes on Alcohol in 2008 (from HONG KONG 80% to 0%) •Gateway to China •Increasing consumption per habitant (3ltr/year to 4.5Ltr/year in 2012) •Between 2010 and 2013 wine consumption CHINA will grow by 25% in Asia •Top 20 chateaux exports are rising fast (Mainland) •Drinking habits (young wine, brand driven market) •600 million people aged between 20-35 INDIA •Only 2% drink wine. By 2012 market research predicts 10% of Indians will be drinking wine (25 million people consume only 1.1 million cases annually > 125 million people in 2012 will consume 55 million cases) •Strong internal investment has fuelled BRAZIL economic growth •The number of wine consumers is expected to increase year on year with 25 to 30 year olds enjoying more imported wine.Offers opportunity to indirectly invest in emerging markets 6
  • 7. Traditional Markets• Wine consumption is being maintained in all traditional markets Wine Consumption 40,000 35,000 30,000 Million Hectolitres 25,000 France Italy 20,000 Spain 15,000 UK USA 10,000 5,000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source www.oiv.int 7
  • 8. Past 10 year trend – TOP 100• Price movement of 100 of the most sought-after fine wines for which there is a strong secondary market.• The majority of the index consists of Bordeaux wines – a reflection of the overall market – although wines from Burgundy, the Rhone, Champagne and Italy are also included. 8
  • 9. Crisis Times• 2008-2009 Financial Crisis – Price correction by an average of 10-20% (dependant upon vintage) – Clients focus on strong brands from best vintages – March 2010 we are already back at the pre-crisis prices (top 100) and +5% more than highest record on top 10.• 1997 Crisis – Weak vintage following two great ones – Opening prices not correctly aligned to quality of the vintage 9
  • 10. Critical FactorsBrandVintage Secondary MarketRating ValueRegion 10
  • 11. Which wines are for investment? BORDEAUX Portfolio - First Growths Bordeaux - - Super Seconds 90% - Top Pomerol and Saint-Émilion Burgundy - BURGUNDY 8.5%- DRC, Leroy, Ponsot Rhone Valley - RHÔNE VALLEY 0.75%- Chapoutier, Guigal, Jaboulet Italy - 0.75% Italy- Masseto, Solaia, Sassicia, Ornellaia, 11
  • 12. Which Vintages?Top vintages Brand vintages • 1961 • 1991 • 1966 • 1992 • 1982 • 1993 • 1986 • 1994 • 1990 • 1997 • 1996 • 2001 • 1998 • 2002 • 2000 • 2004 • 2003 • 2005 • 2008 • 2009 • 2010 12
  • 13. Journalists’ Influence ROBERT PARKER WINE SPECTATOR ALLEN MEADOWS Jancis Robinson(Bordeaux, Rhone Valley) (All Regions) (Burgundy) (All Regions) Wine tasting Release of the first Release of the Release of Harvest during Primeur ratings –> price re-visited ratings physical wines on [September ] period increase – Buy [end of May the market [March ] [End of May ] following year] Robert PARKER rating system 100 Points-scale 96-100 - An Extraordinary wine (typical investment wines) 90-95 - An Outstanding wine 80-89 - A barely above average to very good wine 70-79 - An Average wine 60-69 - A below average wine 50-59 - A wine deemed to be unacceptable 13
  • 14. Current PerformanceLiv-ex 100 - Up 65% over the last 5years, however it is down 16.1% in thelast yearTraditional markets still retaining ademand for fine wine at the right pricelevelsEmerging Markets broadeningtastes through producers and regions 14
  • 15. Out Performing the Index• Careful Stock picking• Intuitive reaction to market conditions•Availability to wide range of stock sources•Carefully planned exit strategy 15
  • 16. Out Performing the Index 16
  • 17. View of 2012• Market broadening• Demand in brand and value driven investment grade wines• DRC has sparked interest in other Burgundy Producers. Speculation Driven ?• Blue Chip Bordeaux heading back into “buy zone” – GBP250-300/Btl• Excitement of Bordeaux 2009’s “the best modern vintage ever”• 2011 En Primeur campaign – a drinking driven vintage 17
  • 18. Key Investment Points• Choice• Buy Early• Cases Only• Keep Records• Insurance• Reputation 18
  • 19. Investing in a Fund Advantages DisadvantagesNo in depth knowledge or passion High subscription and Management for wine necessary to benefit fees Fully managed so no decision, A Fund is not tax free, therefore control or input from investors liable to capital gains tax Lack of flexibility in regards to investment amount, time period and Liquidation of Portfolio Investors have no title of the wine simply a share of the Fund itself You do not have the option of taking redemption in wine 19
  • 20. AWC WineCap Principle Terms• Wine Investment advice provided through Portfolio Management• All stock owned by the investor• Minimum GBP50,000 investment• Minimum investment term 1 year• 2% Annual Management Fee• 10% Performance fee - high watermark 20
  • 21. Liquidating to cash TRADE SALE• Generally 30 days process from Email order to cash payment• Fee: Market price minus 15% fee charged by The Antique Wine Company.• Immediate transfer of the wines from Bonded account to Bonded accounts in the same warehouse AUCTION• Uncertainties, but can realise exceptional values for rare items 21
  • 22. How to begin•Budget, Terms, Preferences•Personal Account Opened• Acquisition of wine• Six Monthly Valuation• Active Portfolio Management 22
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