Asia gets a taste for fine wine investment week - 11-04-2011
40 1 lnveslmentWeek 1 11 April 2011 www.investmentweek.co.uk www.lnvestmentweek.co.uk Investment Week 1 11 AJ:Jri1201 1 1 41 WINE WINE TOP 10 WINES FROM UV~EX ASIAG STASTE FOR FINE WINE fts Asias love affair with fine wine FINE WINE INVESTABLES INDEX lAFITE ROTHSCHILD 2 HAUT BRION 3 lAFITE ROTHSCHILD Vintage Feb 11 Feb 10 %Change 2007 7,500 3,475 115.80 I 2004 3,450 1l60 96.00 1997 7,638 4,002 90.90 grows, Joanna Faith looks at how it is 4 MARGAUX 2004 3,800 2,012 88.90 affecting the asset class as awhole 5 HAUT BRION 2001 3,450 1,850 86.50 6 MCXJTONR01HSCHILD 1996 5,126 2,750 86.40 The success of wine as an asset class is hard to refute - the numbers speak for 7 MARGAUX 2001 3,775 2,050 84.10 themselves. 8 HAUT BRION 1996 3,975 2,212 79.70 At the end of March, the Liv-ex Fine Wine 500 Index was up 2.61% from 9 LATOUR 1998 4,048 2,253 79.70 the previous month and had increased 23.84% year-on-year, while the Liv-ex 10 LATOUR 2007 4,250 2,385 78.20 Fine Wine 100 Index was up 34.26% year By 12-roonm perfllffllilrt:e. Source. Li~Ex on year. .~~.-.e~-~~e. ~~~- 1.~~. Y~ ~~~~:. ~~j~f. i.~~!~~ .......... .. .... ... ... ..... ................................................... With few asset classes currently deliv- ering such attractive returns, the case 1~ for investing in wine is well versed: fine f 1JQ_ - llv-il.ICAneWI71ll100 wine prices are largely uncorrelated to - FTSE100 other asset classes; investors can see S&P600 ~120 returns of up to 30% a year from some bottles; and demand is exceeding supply. A wave of demand from As ia - more !~ 100-1•4!:::-..;::::::::~~ :E II , specifically China, whose love of luxury 8 80 products such as jewellery and designer handbags, has been well documented- is ~ to thank for this new dynamic. Five years ago the Chinese were hardly 40 buying any fine wine, according to Miles Davis, partner at Wine Asset Managers, a •Maroa Sep08 Mar 09 Sep 09 Mar10 Sep 10 Man I Source· LN-Ex specialist manager of wine funds. The impact since they started buying gauge by which investors will jump on a Meanwhile, Paula Golding of Premier wine three years ago has been so signifi- momentum trade. Cru Fine Wine Investments says if Ch ina cant that Davis attributes 36% annual "Given credit growth of 20% in China fell out of love with the commodity, only returns from his funds last year to the and uncomfortably high inflation, these certain wines whose prices the Asia maturing China momentum trades are likely to be called market. has pushed up, would fall. market. into question as the Asian credit cycle The price of Chateau Lafite, for "Our average long- turns." example, has escalated, she says. term performance Meanwhile, Gary Boom, managing "Before Asia exploded into the has been mid-teens; normally you would "Historically, Europe has been director, of Bordeaux Index, a trader of market, Lafite was a blue-chip wine but fine wines, says one of the biggest risks now it is no longer low risk thanks to an expect to see 15% the more knowledgeable market to the wine industry is if "China goes incredible marketing campaign which a year. So 36% was into meltdown". has seen prices go up." a very good year. but over the last 10 years Asian However, Davis says despite certain Wines from the Lafite est ate have Without the Chinese economic headwinds, wine demand from surged by 124% since December 2008. it would have been a markets have started enjoying the country is only set to rise especially Chateau Lafite changed the label for much lower number," and appreciating wine" among its half a million millionaires. the first time , for 2008 bottles, and Davis says. "Chinas interest in wine has 01ily just included the Chinese symbol for 8 , a David Roberts, Goedhuis & Co However, jumping begun. The Chinese love brands. It is a lucky Chinese number. Overnight the on the back of what brilliant way of demonst.rating wealth va lue of the wine increased by 20%. some would describe and over the long time it will only grow," Golding says Europeans will now as a momentum he says. have to pay a premium when buying the trade, should be David Roberts of Goedhuis & Co, a wine. approached with caution, according to fine wine merchant, agrees. "The popu- "There is only so much Lafite 2000 in Mark Pignatelli, manager of the Euro- larity of wine in Asia is a new phenom- the world and when it has been drunk, pean Growth fund at Smith & Wil- enon. Historically, Europe has been the it is gone. Asians are drinking it much liamson. more knowledgeable market but over the younger which means when Europe is He says since the Lehman debacle last 10 years Asian markets have started ready it will have to pay a premium as there has been a greater than 90% corre- enjoying and appreciating wine." there is not enough around." lation between the Fine Wine index and He notes the difference between the two However, Golding says the Asia boom the following assets classes: copper, gold, cultures: in Europe, appreciation comes has not sent all prices through the roof. the Thai stock exchange and the share with age. "People mature and store their For example prices of Margaux andWINE 40-41 prices of Louis Vuitton and Volkswagen. wine." In Asia, people drink it with friends Latour have not been pushed up as much. "The fact they have all performed in as a way of demonstrating wealth. The result of Asias entrance is that.THE BIG exactly the same way might at first sight While wine is being consumed in Asia portfolio diversification is more impor-QUESTION 42-44 seem odd as there is not anything obvi- "at a rate never seen before", Roberts tant than ever. "Top of the market. is ously linking the price of copper and notes supply over the last 15 years has high risk because of prices," she says.INVESTMENT the fortunes of Thai companies with the gone down because the greatest estates "Youd need to balance out with someTRUSTS e; worlds drinking habits," he says. are more quality conscious than ever. 2010. You cant put. all your eggs in one "The answer is that all liquidity (which "Fine wine 10 years ago was a rela- basket."ETHICAL (] ultimately drives the risk premium on tively cheap commodity but because it Overall, she believes the entranceGOLD 49-50 speculative assets) is coming from China. has become an important status symbol of Asia has had a positive effect. on the "As such the real and perceived and replicas have entered the market, wine market. "While they are drinkingUSA 52 wealth of the region is the principal prices have been driven up," he says. it we are making money on it."