Industry

Top ten tips for investing in wine

By Lucy Warwick-Ching June 10, 2011
FT

Wine as an asset class is gaining credibility and many commentators cite recent demand from the Far East as the main driving force.

Peter Lunzer, the principal of Lunzer Wine Investments and a wine trader for Ingenious' Vindemia fine wine EIS fund, says wine is proving to be at least as steady a vehicle as many other modern routes for making money, such as stocks and shares.

Here, he tells Money Matters his top ten tips for investing in wine:

  1. Buy the best that you can afford - a small quantity of the finest wines will serve you better than almost affordable cases which cost you annual insurance and storage charges.
  2. Know who your adviser or supplier is - if you do not know them then ask for references.
  3. Store the wine you buy in government licensed bonded warehouses - this eliminates duty and VAT costs and minimises storage and most particularly, insurance costs. It also reduces temptation to pull a cork at the end of a jolly evening - just to see how the wine is maturing.
  4. Know who has custody of your stock - there is nothing safer than your own, fully insured account in a bonded warehouse. If you do participate in a fund then forget trusting the company and ensure that a genuine custodian is looking after both your cash and your stock.
  5. Buy wines with a truly global secondary demand - this is why most wine fund managers stick to Bordeaux since the whole world has now heard of the top Chateaux. There is no need to neglect other great wine producers from areas such as Italy or Burgundy but only choose the finest labels.
  6. Be aware of the pitfalls on exit - wine is not the value of a merchants list price - it is the price someone will pay you. I like the merchants who offer a broking service where you can see the list prices and know they will charge 10 per cent broking commission. The more wine you have the more adaptable the 10 per cent can be.
  7. Age matters - this refers to the fact that corks are individuals and by the time they are 25 years old they are not all behaving as elastically as each other - the effect is that levels of wine in some bottles can decline, bringing significant reduction in value for the case as a whole.
  8. Investment funds minimise risk - an individual may be lucky buying a few awesome cases in terms of performance but we are talking about minimising risk and a fund does just this.
  9. Buy wines from the right vintage - for every story of a lesser vintage catching up in price there are 20 stories about prime stock - minimise risk by sticking to prime.
  10. Stick to old names despite all temptations from marketing gurus and eulogistic quality reports - give the new kids on the block 50 years to prove themselves. You may make more money from a 'recent discovery' but remember, investment is meant to be boring so stick to the old names and watch unaffordable wines become even more unaffordable as the number of ultra wealthy individuals chasing the same stock, push the prices to previously unseen levels.