Wine Investment
Liquify your assets!
Laying down a cellar of fine wine may once have been the preserve of the super-rich but now it is a fine way to diversify and improve your investment portfolio. Your investment could start from as little as £500 though a more balanced portfolio of wines would start in the £5,000 region. In 1991 a case of Chateau Margaux was selling for £395, on the open market now it sells for £9,000! However you are not going to pop down to your local bargain bucket wine shop, stick their offer of the week in the cellar and wait for the money to stack up. There are rules to be followed, guidelines to be followed.
Wine is a genuinely good investment. At the top end of the market it holds its value very well and, as the example above shows, can produce remarkable returns. As an investment it outperforms stocks and shares, property, works of art and most other investments which are within the reach of an average pension plan. As a commodity it has natural advantages. There will never be another supply of Mouton Rothschild 2005 and every bottle drunk increases the rarity value. It also has tax advantages which are complicated to explain in detail, but essentially the Revenue has ruled that wine is a non-taxable asset providing you are not setting yourself up as a dealer.
| 1990 Vintages | Opening Price (per case) |
Recent Auction Price | Increase over 18 years |
|---|---|---|---|
| Cheval Blanc | £370 | £9,800 | 2549% |
| Margaux | £400 | £9,500 | 2275% |
| Le Pin | £780 | £21,000 | 2592% |
| Lynch Bages | £142 | £2,500 | 1661% |
| Haut Brion | £324 | £6,800 | 1999% |
| Latour | £370 | £7,200 | 1846% |
| Leoville Lascases | £160 | £2,800 | 1650% |
| Petrus | £1,695 | £36,000 | 2024% |
| Lafite | £376 | £9,700 | 2480% |
So, how should you go about investing in wine?
Firstly, study the market. Wine investment is not usually a short-term investment which can be realized at any time. Unless you have an excellent knowledge of the wine market (which is not the same as appreciating the taste!) choose a well-established wine merchant who can advise you what to buy and when you could be selling. Wine merchants will have an up-to-date knowledge of current prices and what is worth investing in now. Be aware that the wine investment industry is not regulated and anyone can set themselves up in it. Your best defence against this is to only deal with long-established companies who have a good track record and demonstrable experience.
What are you likely to be buying? Almost certainly Bordeaux will form all or a large part of your investment. The wine market is conservative and it is established wines that will attract the best prices. That Australian Cabernet that you had last night may well have matured beautifully in 5 years but it is unlikely to attract the same price as a similar wine from Bordeaux. Champagne, Burgundy and the Rhone Valley can also be regarded as safe bets. Just occasionally a new region will be added to this list, such as the new wave of Spanish producers. You may also be buying before the wine has even seen a bottle! Very good money can be made by investing in what is call en primeur, that is buying wine in the barrel in the knowledge or expectation that this year’s vintage will be exceptionally good. As with all good things, it pays to get in at the start.
You may be surprised to discover that most serious wine investors will never see their investment. Having invested good money in a quality case of wine it is not a good idea to stick it in the garage and hope it will be okay. Wine merchants will offer what is called ‘in bond’ storage where the wine is stored in optimum conditions to keep its value. Although there will be a charge for this, it is has the large benefit of establishing a provenance (or history) for the wine. Like a work of art, knowing where it has been and how it has been kept is a large part of the value.
Once you have your wine what to do next? Keep in touch with your wine merchant and build a good relationship. They will be much more likely to give you their best tips knowing that you have an active interest in the subject. They will also be able to give you a current valuation of your investment.
Wine as an investment has an excellent quality – unlike the stock market it is not affected by external matters. No matter what the price of oil goes to, a case of Lafite remains a case of Lafite. And if you win the lottery you can always break open a bottle or two!
Wine Bank
WineBank is a dynamic form of wine investment. Your investment becomes active via our broking services. Tax Free profits generated are retained within your portfolio making the value of your WineBank portfolio increase in value more effectively than sitting wines.
WineBank portfolios consist of carefully selected blue chip Bordeaux cases, Premier Crus and Super Second Bordeaux, wines that are traded in the fine wine market daily and which have consistently performed very well in the investment arena, considerably outperforming traditional forms of investment.
As a WineBank account holder you will also be entitled to several other benefits including regular valuation updates, and most importantly constant focus on your portfolio. We are regularly receiving and looking for good deals on blue chip wines and you will be top of the list when we consider where to allocate these wines.
How does it all work?
We have effectively developed a trading platform on which wines belonging to private clients can be traded and re-invested. Over a period profits generated on trades help to build your portfolio value.
WineBank is structured so that both the WineBank client and Nickolls & Perks, as the administrator, benefit mutually and equally from the successful and prudent management of the portfolio.
Funds introduced into WineBank are invested in blue chip wines at the best possible price. Nickolls & Perks may already own the wines or may buy in from the market, our connections and buying power ensuring the best starting point for your investment. NOTE: Nickolls & Perks do not take an initial profit or setup fee, wines are introduced at our cost price.
How much should we invest and for how long?
There is a minimum requirement of £10k to set up a portfolio. There is no maximum portfolio size. In general we recommend a five year term to allow your portfolio to mature.
How are the wines traded?
Wines within WineBank are effectively on the market,inclusive of a mark-up, which is in general around 10%. They are added to Nickolls & Perks’s broking stock, which is published via the Internet, through our own website www.nickollsandperks.co.uk and through the powerful web wine database www.winesearcher.com
Funds from wines sold are re-invested in new wines to be marketed in the same way.
How are the portfolios valued?
The market value of blue chip wines are constantly monitored allowing for regular appraisal and update of WineBank portfolios. WineBank clients will receive an updated WineBank statement bi-monthly. The valuations are based on keen market price data resourced from winesearcher.com.. The value of a WineBank portfolio will be the total value less 5% disposal discount, which can be used to help market the portfolio expediently.
How much profit will be generated?
We cannot predict this accurately, only report our experiences of decades of trading and wine investment. Our aim is to trade portfolios at least twice(in value terms) over a 12 month period. This will generate approximately 20% profit into the portfolio. At the same time the growth of Fine Wine values remains phenomenally high and we would hope to see a further 10% growth in the portfolio over the same period.
Please note wine prices can go up and down, these figures are based on historical data and experience.
Can we have some profits out and when?
The overriding ethos of WineBank is that the WineBank client and Nickolls & Perks work in partnership. Profits generated are shared equally between the client and Nickolls & Perks. We recommend profits be allowed to compound within the portfolio for a minimum of 12 months, at which time they can be realised in the form of a dividend generated by re-selling some assets of the portfolio back to Nickolls & Perks. Alternatively the profits can be left in to compound again over the following 12 months.
Exit strategy
WineBank portfolios can be liquidated at any time, though we recommend a minimum of 12 months for your investment to show its potential. The exit process can take a little time, and so we suggest you allow 3 months for disposal of the wines into cash. The process is likely to be much quicker than this and can, if needed, be speeded up by discounting the wines.
Contact Will Gardener sales@nickollsandperks.co.uk 01384 394518
