Is fine wine the ultimate collectible?
The Economist recently reported that a team at the London Business School have been running an analysis for years on the respective performance of different “collectible” assets like art, classic cars and fine wine, and the consistent winner over the years is fine wine!
Many rich people with diversified portfolios like some of their wealth within more tangible form than stocks and bonds. Property is visible and ostentatious, but then so is art and classic cars and to a certain extent fine wine. In the case of investment grade Bordeaux which matures (i.e. gets better) as it gets older, the higher the price. Therein lies the key to an investment in fine wine – it’s likely to increase in value over time.
There is a long-term (28 year) trend for fine wines to outperform other, more traditional asset classes, such as gold, oil and equities.
Source: liv-ex.com; yahoo.finance.com; lbma.org.uk; calculations by Anpero Capital Limited.
Being a physical asset, fine wine is also impervious to value erosion as a result of inflation. It shows little correlation to more traditional assets in normal market conditions, which suggests it can provide portfolio diversification and reduce risk.
Despite a 36% price drop followed by market stabilisation from 2011-15, fine wine appears to be on the up. The graph below shows evidence of this, showing the fluctuating price of fine wine in recent years set against the long-term upward trend line. The history of the Liv-ex 100, the fine wine index, since its inception in shows that the market is still below the long-term trend, despite having recovered substantially since 2015.
Source: liv-ex.com; calculations by Excel
Possible with the EIS?
It is still possible to invest in fine wine via the Enterprise Investment Scheme. Recent rule changes to the EIS, however, announced in last November’s budget and which come into effect on the date of Royal Assent to the Finance Bill (expected around the middle of March), may allow HMRC to argue that such an EIS may involve little or no risk and may not therefore grant approvals for such offers going forward. Until then, though, you can still benefit from the substantial downside protection of our wine EIS. So how does it all work? An existing company, which carries on a trade in fine wine and which has been granted EIS advanced assurance from HMRC is invested in. The Company buys and sells “lots” of fine wine and looks to make a trading margin of around 6%-8%. Held in UK government warehouses, with replacement value insurance and excellent storage conditions. Wines traded by the Company are solely investment grade, from sought after Bordeaux vintages and with substantial ageing quality.
After three years, the Company can dispose of its wine holdings at the then current prices. Judging by the long-term trend analysis (see graph below), could well be significantly above current values. So, the investors return is made up of trading profit. Any uplift in value on disposal, less of course the usual operating costs. The management team behind our current wine EIS offer have achieved a very respectable average annualised return from the paid-out tranches of their wine fund in recent years of 7.1%.
But hurry – this opportunity runs out in about a couple of weeks from now!
For more information on our Wine EIS visit http://www.enterprise-ip.com/investment/wine-eis/ or contact Martin Sherwood on 020 7843 0472.
This financial promotion has been approved by Enterprise Investment Partners LLP, which is authorised and regulated by the Financial Conduct Authority (FCA) (FRN 604439). Enterprise Investment Partners LLP is registered in England and Wales. Registered No: OC357090. Registered Address: Hyde Park House, 5 Manfred Road, London SW15 2RS
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Your capital is at risk and you may not get back the amount invested. You should not invest unless you can afford total loss or if you are likely to require the capital in the near term, since such investments can be difficult to realise. Past performance and any forecast is not a reliable indicator of future performance. Investment in unquoted companies carries high risk. No established market exists for the trading of shares in private companies, making it difficult to sell shares. Tax treatment depends on the individual circumstances of each investor and the tax status of investments may be subject to change. The availability of tax reliefs depends on the investee Company maintaining its qualifying status. It is not an offer to invest. Investment can only be made on the basis of the full Information Memorandum and the risk factors contained therein. We recommend you seek advice from an independent financial adviser authorised under the Financial Services & Markets Act 2000 who specialises in investments of this type.