Several key factors have contributed to fine wine’s performance as a
leading alternative investment over the past three years.
NEW YORK & LONDON–(BUSINESS WIRE)–
According to a report released today by analysts at leading fine wine
investment company Cult Wines Ltd, fine wine’s performance during
periods of economic deterioration compares favorably to the performances
of equities and gold during the same period, demonstrating distinct
defensive qualities that can insulate investors from some of the risks
inherent in an equity-based portfolio.
In Exhibit 6 of the report, “Fine Wine vs. Global Equities,” Cult Wines analysts demonstrate that the performance of the Liv-ex Fine Wine 1000 — an index tracking the prices
of 1,000 wines from top wine-producing regions around the world —
compared favorably to those of the FTSE All Shares index and gold
futures, both during the depths of the financial crisis (2008-10) and
during the peak of the economy recovery that followed (2015-17).
Between 2008-10, the Liv 1000 returned a little less than zero, whereas
the FTSE All Shares lost about 25% and gold futures fell nearly 5%. Over
the period spanning 2015-17, on the other hand, the Liv 1000 returned
10%, while the FTSE All Shares returned roughly 9% and gold futures 8%.
Among the factors contributing to fine wine’s strong recent performance:
- Limited Supply of Fine Wine – Like all luxury goods, fine wine
is produced in finite quantities in specific regions, which prevents
supply from fluctuating significantly from year to year.
- Growing Demand in Emerging Markets – Burgeoning wealth in
emerging markets, especially in Asia, has driven the market for fine
wine higher and will continue to do so in the coming years.
- Weakening British Pound – With sterling sinking in light of the
Brexit decision, fine wine, which is priced in pounds, has become more
affordable than ever for foreign buyers.
“With global equities markets potentially facing the end of a record
bull market, it is important to highlight fine wine’s ability to help
investors avoid downside risk,” said Tom Gearing, Managing Director of
Cult Wines Ltd. “Our report shows how fine wine can act as a defensive
asset class in times of economic crisis but also benefit from periods of
While fine wine has long boasted a reputation as a defensive asset, Cult
Wines’ analysis has demonstrated that the extent to which wine can
retain its diversification benefits even amid broader economic
deterioration. This analysis shows that fine wine remains a viable
alternative asset class because of its distinct defensive qualities.
Fine wine’s investment profile is governed by a unique set of market
fundamentals and risk factors. Cult Wines believes rising global wealth,
a weakened British pound and a continued interest in fine wine in China
and other non-traditional wine markets will continue to strengthen
growing demand for wines with strictly limited supply.
“We’re optimistic about the future growth of the fine wine investment
market,” Gearing added. “With the right expertise, investors will have
the significant opportunities to bolster their portfolios with a stable,
defensive asset class.”
This article provided by NewsEdge.