Wine is an easily accessible luxury good for the newly wealthy, because it has a relatively low price-point for entry compared to things like yachts, cars, jets and art, says Ileana Van Der Linde, a principal in the wealth management practice of consulting firm Capgemini. Shelling out a mere $1,000 for a case of quality wine can get you into the club.
More American investors are also diversifying their portfolios by adding wine. Fine wine produces comparable returns to equities and bonds over the long term with less volatility, because the market is largely unaffected by economic issues like higher interest rates, Miles said.
To be sure, there have been bad years. Prices fell about 20% between the end of 1997 and early 2000, partly because business collectors in Asia dumped their holdings after the collapse of the Thai Baht hammered currencies and stocks in the region.
Brand New Bottle
Structural changes, such as increased selling and trading through the Internet and the creation of professional wine investment funds, have also helped attract new money to the market. Investors who can afford a minimum investment of between $20,000 and $200,000 can leave it to professionals at a handful of funds, such as the Vintage Wine Fund with assets of around $35 million, Wine Investment Project, Orange Wine Fund listed on Euronext, UK-based Wine Investment Fund, and Fine Wine Fund, also UK-based, which is structured like a hedge fund. Each charges an annual management fee, as much as 2%, and takes a cut of the profits, typically 15%.
“Fine wine used to be a very small niche market and was hard to get into, but the Internet has made it possible for more people to educate themselves and get involved,” said Jerome Zech, CEO of leading online auction site WineBid.com, which raked in about $22.5 million in sales in 2006, up 13% from 2005.
“It’s gotten more transparent,” said Miles of Liv-ex. “The effect has been more confidence in investing in fine wine because you can make quantitative evaluations of what returns are available.”