Fancy a sip of wine investment?
With the global equity market in turmoil & sluggish
local property market, alternative forms of investment have become increasingly
popular in Singapore and wine investment is definitely one of the most
attractive options now. With correct application of the basic fundamentals,
investors could enjoy steady returns at minimum risk levels.
Wine
Selection
Investment grade wines are the acknowledged and
prestigious ‘blue chip’ wines that generate steady investment returns for
investors. These wines have to be produced in limited quantity, be highly
sought after worldwide and improve in quality over time. Demand for these wines
will always remain high as the total number of bottles available will reduce as
they are consumed, resulting in a rise in its price. Invest in wines that have
received at least 90 pointers and above by influential wine critic Robert
Parker, who is undeniably the most influential wine critic in the world. Buy
only in unmixed sealed original wooden case (OWC), as these will be worth the
most and can be traded internationally.
Trusted through the years for its premium quality,
Bordeaux wine prides on its established resale history and is still the primary
investment medium. Fine Bordeaux wines are produced in limited quantities,
which is the primary factor for the supply & demand theory to work on wine
investment. Less than 1% of all the wines worldwide are investment grade and
Bordeaux makes up 80% of these wines. Prices of fine Bordeaux wines can be
tracked from their day of release “En Primeur” (or wine futures) till their
auction sale, offering investors total transparency in prices.
Refrain from investing in wines that do not have a strong
global market presence and demand as they are definitely high-risk & purely
speculative. Avoid allocating too much of your wine portfolio in New World
wines as they generally have a much shorter ageing potential and their
vineyards do not practice Bordeaux’s limited production output to ensure the
best return on investment.
Wine Futures
Wine Futures, or “En Primeur”, is a method of purchasing
wine early. Essentially, the wines are offered for sale while they’re still
ageing in oak barrels, 2 to 5 years before they are bottled. Once the wines are
ready for delivery, buyers have the choice of either paying duty and taxes or
having the wines stored in a bonded warehouse until it is delivered or sold on.
There are a number of rewards in purchasing wines this
way. These include securing highly sought-after wines which are difficult to
obtain from great labels & great vintages, as well as securing the wines at
a lower price than otherwise anticipated when they are out in the consumer
market.
Brokerage House & Merchants
Buy and trade only with reputable merchants or brokerage
house with proven track records. A reputable brokerage house should include the
management, the storage and the insurance in their portfolio and they should
guide you through the exit strategy. You should shop around for advice &
prices and you should be able to obtain third party verification on the
validity of the documentation for wines they have purchased, especially the“En
Primeur” wines.
Storage & Insurance
The “provenance”, or travel history, greatly affects the
prices of the wines. Bordeaux wines stored in France usually give the highest
resale value. Ensure that your wines are stored in a temperature &
humidity-controlled warehouse and that your investment can only be moved with
your written approval. While many modes of commodity investments in the market
would involve the investor being charged taxes at one point or another (for
duties and excises etc.), Wine-Investment is an exception. There would be no
costs incurred in taxes as wines bought for investment are usually stored in
bonded warehouses (i.e. warehouses in which goods with unpaid duties are stored
under bond and in joint custody of the importer, or his agent, and the customs
office). You should also ensure that your wines are insured at full replacement
value. If you buy via a wine brokerage company, this should be included in your
wine portfolio.
Wine should be regarded as a medium to long-term
investment, with a minimum 3-year holding period and the best returns over a 5
to 8-year period. But should your investment depreciate, you could always open
a bottle to drown your sorrows!
