Fine wine investment strategies

by Wine Owners

Posted on 2018-09-19


This is an extract of Wine Owners' Collecting and Investing in Fine Wine guide. You can download if for free here.


Short-term? Long-term?

Generally speaking, wine investments perform best over a minimum period of around 5 years.

There is no single ‘right answer’ of course. Some very active collectors sell and reinvest as soon as they see a fixed return, following speculative market momentum. Other collectors tend to hold for long periods of time— and although they may go through periods of flat or negative growth, typically they benefit from shifts in supply and demand; when demand pulls significantly ahead of supply, prices tend to move sharply reflecting that imbalance. Longer-term strategies may also benefit from partial realisation of profits to mitigate the risks of re-ratings.

Wine has periods of both high and low performance, just like any other investment class. Medium- and long-term holds tend to perform more consistently as a result. They also give investors the option to enjoy matured wines (i.e drink rather than sell), if their financial circumstances improve such that personal enjoyment of the wine becomes more significant than the financial value of selling it.



Vintage follower vs. perennial buyer

A common refrain among some investors is “the best wines from the best vintages”. It’s practically a matter of pride having exclusively the best wines in their portfolios.

However, this approach does not fit with the reality of how buyers are allocated wine at first release by merchants. Nor is it necessarily a good idea.

With Bordeaux, this ‘best-vintages-only’ policy is relatively easy to maintain. There is no particular need to buy off-vintages because the wines are produced in volume, and are widely distributed.

But things are different for scarcity-led markets such as top Burgundy, Barolo and cult Californians. Here, supply is low, demand is high and distribution channels are narrow. The net result is that suppliers can apply pressure on consumers to buy a particular wine every vintage, or else lose their right to an allocation next year. With so many customers vying for these wines, merchants can choose to give their best allocations to their best (most consistent) customers. Maintaining an allocation of these wines, therefore, requires consistent buying every vintage, irrespective of quality.

Cherry-picking vintages doesn’t always work, either. Vintages which are heavily touted initially are not always those considered the best in the fullness of time. Piedmont 1997 was considered a stellar vintage early on, but today the favour falls with less-hot vintages such as 1998, 1999 and 2001. And this works both ways; Burgundy 2002 was largely unloved at release, but has now evolved into one of the all-time greats.


Relative value picking 

Identifying value is vital for both short- and long-term performance. How do you select which new releases to pick, or determine which vintages of a wine represent the best value?

Picking the best prospects is now simple. Use relative value analysis to find sweet spots between market pricing and (carefully weighted) critic ratings.

To determine whether Le Pin 2017 is a sensible en primeur purchase, the analysis below compares it with four earlier vintages. The Relative Value Score shows that 2017 is a more attractive buy than the higher-rated 2015 and 2016 vintages. It also confirms that 2012 offers better value (at current market prices, factoring in current critic ratings) than any of the other four vintages.


This is an extract of Wine Owners' Collecting and Investing in Fine Wine guide. You can download if for free here.


Rioja was Spain’s answer to Bordeaux

by Wine Owners

Posted on 2018-09-14


Rioja was Spain’s answer to Bordeaux - incredibly high quality AND quantity produced from noble grape varieties (in Rioja’s case Tempranillo). 

Back in the 1950s and 1960s the large Rioja houses were making wine of extraordinary quality to rival their Bordeaux neighbours to the north. By the 1980s and 1990s many Bodegas had let standards slip (with a few notable exceptions) and the outside world turned away from Rioja, creating a self fulfilling downward qualitative spiral. Since the early 2000s the region has turned itself around, make serious investments, and more recent vintages have attained (or perhaps even bettered?) the heights achieved of their great post-war vintages. 

Rioja prices are still great value but the world is catching on, the positive cycle is established an the region’s future as a blue chip wine producing region is more or less assured.

The following shows the jump in the last 12 months of Rioja prices compared to the general Spanish Index (in which there is a hefty Rioja set of constituents as well). 

For the budding collector, without access to unlimited funds, Rioja is the obvious region to buy into on a 10-year view.


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