If you can resist the temptation to drown your sorrows, a bottle of fine wine could prove a better bet than shares
Date: 11/10/08 - Source: The Mail Online
Crashing stock markets, collapsing house prices, bankrupt banks - it's enough to drive you to drink. And that is what many investors are doing as they look for alternative ways to make money in these difficult times.
According to the Fine Wine index, returns from fine wine are almost ten per cent for the year so far. 'We have had a significant increase in interest from potential investors in recent months, perhaps due to the uncertainty in other investment markets,' says Rob Chase, fine wine manager at Adnams, the brewer and fine wine trader.
Investment-grade wine boils down to quality, longevity and track record; and the most important factor is buying the right château in a great Bordeaux vintage. In the past 50 years, you can almost count the uniformly great Bordeaux vintages on the fingers of one hand: 1959, 1961, 1982, 1990, 2000 and 2005. To work out if it's going to be a banker, you first need to follow the form book and study the critics. The next rule is to buy the right wines, preferably in the period when prices are released in the spring after the vintage (en primeur). Of the many thousands of châteaux in Bordeaux, there are only 50-odd, so-called investment-grade wines. So, stick to the old masters of the wine world, bring in arm-twisting skills for prising out tiny allocations, add that dash of luck again, and you might just find yourself ahead.
'Demand for the highest quality wines remains strong and I see no reason, even in a time of global economic downturn, for that to go away. If investors do their research, take advice and purchase well, there are good returns to be made.'
Wine should be viewed as an investment of at least five years. There is a small range of funds that track the market for investors who just want exposure without buying stock or getting the chance to drink it.
Those who want to become more directly involved should make sure they use reputable and established fine wine brokers.
The Bunch Code of Practice is an industry standard to which a handful of wine dealers subscribe. They include Adnams, Berry Bros & Rudd, Corney & Barrow, Laytons, Tanners and Yapp Bros. The code sets minimum standards for the storage of investors' wine, for example.
Investors can buy cases of wine and pay a broker to store it safely. To get a diverse mix of wines, dealers suggest a minimum investment of £10,000.
Start with blue-chip Bordeaux chateaux, which represent about 90 per cent of the fine wine market, or the top Burgundy labels. Investors buy 'en primeur' - before the wine is bottled and released on to the market. This way they get it cheaper. The wine is typically d e l i v e r e d two years later and held in bond by brokers on behalf of their investors. Holding the wine in this way will ensure it is kept at the correct temperature in the dealer's specialist cellars. It also has tax advantages because no duty or VAT is payable.
Tax applies only if investors want to take delivery of their wine. The wine specialist website decanter.com has more information available on how to get started in fine wine investment.
Alternatively, many dealers offer plans where investors pay a set amount each month, allowing the broker to choose how best to use it.
Antiques Roadshow presenter Katherine Higgins has been investing in wine for more than a decade. She pays regularly into the Cellar Plan through Berry Bros & Rudd.
Katherine, who lives in Guildford, Surrey, with her husband, Tom, 43, says the idea is to provide a long-term investment for their three children, Oliver, 7, Poppy, 5, and Cicely, 3.
Investors can get started in the Cellar Plan from £100 a month. There are no annual management fees and clients get advice on the best wines to buy, when to sell and when to drink.
Katherine, 41, an expert in collectibles, says: 'I've always been interested in collecting fine wine and investing since I was a student working in auction houses. I started to invest more seriously after I had my children.
'I see wine investment as watertight over the long term compared with equities. I've had stock market investments and they have never performed well.'
One of the advantages of alternative investments, such as wine, jewellery and classic cars, is that they can always be enjoyed even if financial returns are disappointing.