According to London’s International Vintner Exchange, or the Liv-Ex Index, sales of the 100 most commonly traded vintages fell flat for most of 2014, finishing the year down 7.3%. The S&P, on the other hand, rose steadily during this same period and boasted a year-end 11% increase in returns.
Should you Invest?
In the long run, however, wine has consistently outperformed the S&P. Forbes investment writer Carl O’Donnell compares the markets over the past ten years: "Between 1993 and 2013, a diverse portfolio of investment grade wines would have returned 13.62%, more than double that of the S&P 500."
Mark Ricardo, president of Trellis Fine Wine Investments, a private equity fund which invests exclusively in wine, encourages investors to think about wine as an option when looking for ways to round out a portfolio. He says wine has a low correlation with the stock market, making it a good way to diversify one’s assets.
Ups, Downs, and the Future of Wine
The fine wine market saw a boom in 2011, after ascending steeply and fairly steadily for the previous five years. Since 2011, however, the wine market has been declining or flat, depending on which index you reference. (See end notes for a few useful wine indices).
The S&P, on the other hand, has been rising consistently since 2011. There are (unsurprisingly), a wide range of opinions about why the wine market has been declining for the past four years. Most expert sources are optimistic, however, and see the decrease in wine returns as a fairly standard blip in the market’s growth. These experts point out that most of the losses were suffered in the market in the first half of 2014; sales have been rising and stabilizing since July 2014. Speculators therefore anticipate 2015 will be a strong year.
Wine Spectator attributes the poor performance in of 2014 to “summer doldrums,” or simply a decrease in the volume of wine being sold in auction. Spectator concludes with John Kapon, CEO of Acker, one of the oldest and most prominent international wine auction houses, observation that the market slowing down shows strength in the market overall, rather than a bubble-like appreciation rate of one particular grape. “Prices are moving up across all of the key segments, but growth will be steady,” Kapon predicts. At the market’s peak, most of the market value came from only a few very high performing wines, Bordeaux in particular. Now that the market has leveled off, there can be more room for stable growth in the future. Like a fine wine, it seems reasonable to hope that the market will keep getting better with age.
A few Different Wine Indices:
1. Wine spectator Auction index: composite of average prices for 32 selected benchmark wines sold at commercial auctions. Wines included change regularly based on which are deemed most important in the market. http://www.winespectator.com/display/show/id/auction_index
2. Liv-EX (London's International Vintner Exchange): The Liv-Ex 100: "represents the price movement of 100 of the most sought-after fine wines for which there is a strong secondary market. The index is calculated monthly."
3. Wine market journal: Displays the most actively traded wines in the market.
Brielle Cotterman and Paige Stover Hague are the principals of Crowninshield Consulting. Their firm partners with professional advisors throughout the country assisting with succession planning and transfer of passion investments. They also work with individual collectors who seek to inventory, evaluate, and/or transfer highly-valued items of personal property with specific wealth transfer and philanthropic objectives. For more information about their company, please contact Brielle at 765-776-0492 or Brielle@CrowninshieldConsulting.com.
by Paige Stover Hague, Esq. and Brielle Cotterman