Uncorking the Fine Wine Market

[Matthias R WHT]

Investors looking for variation from stocks, bonds and currencies
could try investing in good wine, which has provided good returns over
long periods of time - but should beware of unprofessional advice in
the area, analysts and experts told CNBC Tuesday.


"Wine has always been an important part of a rich man's portfolio,"
James Miles, founding director at Liv-Ex, the wine market's most
prominent exchange, said.

It can be an attractive investment particularly because of its period-
to-trade which is independent from mainstream financial markets. But
not all fine wine is a safe investment, Jancis Robinson, Master of
Wine and respected wine writer, warned CNBC.

"There are so many people who are relatively new to wine who are going
around setting themselves up as experts on investment in wine and are
spreading the complete myth that all fine wine is a safe investment.
It's not," Robinson said.

"If wine's allowed to get much hotter than about 70 degrees
Fahrenheit, that complex will cave," she added.

Wine investment does not often correlate with what is happening in the
financial markets, Miles Davis, partner at Wine Asset Managers, told
CNBC. "Long-term correlation numbers are actually extremely low," he
added.

"Over the course of last year, the first four months after Lehman's
collapse we lost over 17 percent of our asset value on our fund,"
Davis said. "In the following six months after that, we leveled out.
The market gained equilibrium and since halfway through this year
we've started on the turn again. We're probably about up six percent
in the last couple of months."


Compelling Long-Term Trend

Wine Asset Managers' fine wine fund was up 4 percent month-on-month in
August and the longer-term trends for wine investment are compelling:
"It has produced consistently good returns every twenty-year period,"
Miles said.

Ways to gain exposure vary, from investing through Liv-Ex, the wine
market's most prominent exchange to bidding at auctions that offer
access to physical bottles of wine - but storage of wine is integral
to maintain its value, experts say.

"Auctions tend to have things that you can't find in a store," Serena
Sutcliffe from Sotheby's said.

A way to avoid the pitfalls of physically-owned bottles of wine is to
invest in a fund, where the physical assets are held in professional
bonded warehouses.

Davis suggests investors look to "proper asset managers" for guidance
in the wine market. Super-returns are achievable following a
correction, he added.

"The advantage of buying through a fund is that you're doing it with a
professional. There's a high level of assurance that they're going to
be buying it at the right price, and you're buying into economies of
scale," Miles said.

According to vintners 2009 is expected to produce outstanding French
wines. Favorable weather conditions have helped produce a bumper crop
and good grapes.

"Demand is being very much driven from Asia, particularly Hong Kong
and China at the moment," Davis said. "(Chateau) Lafite (Rothschild)
has been the market leader this year. The Chinese demand for Lafite
seems to be insatiable at the moment and prices of Lafite have risen
between 30 and 60 percent this year, depending on vintage."

Red Bordeaux is the prominent wine to invest in as "production levels
of Bordeaux far exceed other big labels," Davis added.





- Lisa Auret. CNBC. 29 Sep 2009.