The past few weeks, let alone year, have highlighted the turbulence of the financial markets. The current period of uncertainty stemming from the war in Ukraine, cost-of living crisis and rising inflation means that many investors are looking away from traditional equities and searching for alternatives assets such as gold, art, collectable cars and of course fine wine and rare spirits.
Fine wine is increasingly becoming a favourable alternative for investors to diversify their portfolio, due to its stability and low correlation with the equity market.
In the recent Knight Frank Wealth Report, investment managers noted that globally, 39% of their clients were looking to allocate investments into fine wine. The Knight Frank Luxury Investment Index (KFLII) which tracks the value of 10 investments of passion, rose by a healthy 16% during 2022, comfortably beating inflation and outperforming the majority of mainstream investment classes, including equities and even gold. You can read the full report here.
Fine Wine Performance v. traditional assets over the past two years
As you can see, demand remains for Champagne, one of the top regions last year which has risen 54.2% over the past two years, outperforming all traditional assets. A highlight for our investors has been Cristal 2012, which has appreciate an average 29%, only on the market for a short time. Alternatively, Krug 2008 has risen 40% since its release.
We’re also seeing interest in other regions, on the back of the rise of Burgundy and Champagne which offer more relative value, including Rhone and Bordeaux. With Bordeaux 2020 now in bottle, there has been a flurry of activity for this vintage, especially with plenty of favourable scores from the critics. One of our favourite Californian estates, 2018 Harlan which we’ve held in portfolio for just over one year had already risen 28% on average.
The next main industry event is Bordeaux En Primeur 2022, which is believed to be one of the greatest modern vintages. After a mixed campaign for 2021, where the calibration of prices for the quality fell short of expectations, we are optimistic about 2022 given everything we have heard about the vintage quality, but as always will see how the release pricing unfold.
For investors, we recommend taking a long-term view still, build an all-weather investment portfolio that has long term core holdings to deliver steady long term returns as well as opportunistic positions that may deliver shorter-term upsides.