It was enough to drive investors to drink. After five years of intoxicating returns, the value of fine wines last year plummeted as turmoil in financial markets spurred a flight to safe haven investments. Now though, several wine investment professionals and fund managers are discerning the resurgence of more palatable returns.
A number of new funds are being launched, hoping to buy in at the bottom of a market that had, until last year, seen wine outperforming the FTSE 100, the S&P 500 and the Nikkei 225. Some First Growth vintages, mainly the 2005s, are as much as 40 per cent off their high, while the Vintage Wine Fund (www.vintagewinefund.com), one of the largest in the market, lost 33 per cent last year and the Fine Wine Fund (www.wamllp.- com) fell 17 per cent.
Stacey Lea Golding, investment director at Premier Cru Fine Wine Investment (www.premiercru.com), says: “Historically, it [fine wine] has been the last investment to fall and the first to recover. I believe that prices have now bottomed out and early indications are showing that now is the best buying opportunity since the last drop in 1997.”
Anthony Gahan, an investment banker, is in the advanced stages of raising £100m capital for the Red2Gold fund (www.red2- gold.com), which will be one of the largest in the world.
“Prices have fallen, but we see that as a real window of opportunity which won’t last for too much longer,” says Gahan. “We also believe the fundamentals of wine investment remain very strong. Extremely wealthy people haven’t stopped drinking great wine.”
Red2Gold will be a 10-year capital growth fund with an initial three-year lock-in and fees of 2 per cent on assets and 20 per cent on performance – although it will not take any performnce fee for the first three years. It will be heavily weighted to blue-chip Bordeaux chateaux.
Elsewhere, First Growth Bordeaux Ltd (www.firstgrowthbordeaux.co.uk) is about to launch an investment vehicle that will be Jersey registered and regulated. Called FWT-30 (Fine Wine Top 30), it aims to raise £10m with a view to launching by the end of June.
“The main opportunity for the fund is to buy up significant wine stocks from a narrow group of chateaux that are keenly priced at the very bottom of the next growth curve,” says Charlie Martin, managing director. “Our main focus will begin with the 2005s, which is the investment vintage to grab, particularly at current values.”
Some investors clearly agree. Earlier this week, Richmond Partners, the merchant bank, announced that it had purchased a 29 per cent stake in Peter Lunzer’s wine investment house (www.lunzerwineinvestments.com) to start another new fund. The Lunzer Wine Investments Institutional Fund will open this month with £15m-£20m in assets. Investors will need a minimum of £500,000.
Meanwhile, Lunzer’s erstwhile colleagues at Anpero Capital (www.wineinvestmentfund.com) have launched two segregated wine funds requiring a minimum investment of £10,000. “Since the beginning of this year, we have received a huge amount of interest,” says Anpero’s Andrew Della Casa. “One of the reasons for this is that prices are beginning to stabilise and in some cases harden,” adds Della Casa. This was reflected in small gains by the Liv-ex Index 100 Fine Wine Index of 1.2 per cent in January and 1.3 per cent in February. This followed a 14.6 per cent fall in the index in 2008, its first annual fall since 2004.
But not everyone is convinced that the global fine wine market, worth around £2bn a year, is out of the woods. Gary Boom, managing director of Bordeaux Index (www.bordeauxindex.com), the wine merchants, still sees more money flowing out of wine than is coming in. “And I don’t see that changing in the immediate future,” he warns. “Demand is fairly steady, but not particularly strong and right now there is still a lot of stock on the market.”
John
Stimpfig is a contributing editor of the FT’s How to Spend It
magazine
