How the Fine Wine Market works

“For the ultimate in liquid investments, try top quality wine, which has outperformed one benchmark U.S. stock index for 13 years and withstood two recessions.” – Bloomberg.

The fine wine market works on a simple supply and demand basis of economics. Supply is limited due to strict production laws, creating steady demand for a class of wine in finite supply.  Coupled with the fact that as a wine matures and improves with age, a high number of bottles will be consumed which will in turn reduce the supply further and therefore increase its value. Leading American financial services firm Morgan Stanley once quoted their concerns over a world shortage of fine wine, with the demand exceeding supply by 300m cases. The Bordeaux region (The world’s leading region for fine wine production) has seen a reduction of around 12.5% in production, meaning that the best wines in the world are highly restricted and therefore face increasing demand.

“Since 1988 when reliable data first became available the fine wine market has generated an annualised return of 12.1%”. – Financial times.

There are various other advantages aside from the obviously lucrative returns from the fine wine market. The most obvious being that your investment in wine is a completely tangible asset. You are in complete control of your investment and have the capacity to buy, sell and even drink the wine you invest in. We at Vintage Associates are proud members of the London International Vintners Exchange (Liv-ex), which has brought new standards of efficiency and transparency to a traditionally opaque market. The exchange enables us to buy and sell clients wines when necessary. In short, the fine wine market Is one of the most liquid investments available to the everyday investor.

Part of our affiliation with Liv-ex enables us to offer our clients a secure storage facility for their wine, which also comes with insurance. Your wine is stored at one of London’s leading underground bonded warehouses, with professionals ensuring your wine is kept at the optimum temperature. You can also book an appointment via your Vintage Associates consultant if you would like to go and view your portfolio in person.

The fine wine market is also one of the best investments in terms of a tax benefits. Fine wine is regarded as a wasting asset and therefor is classified different to stocks and shares or property. This means it is completely exempt from capital gains and income tax, however please note that we recommend consulting your accountant upon selling your acquisitions. 

“This is no flash in the pan. Since 2001, when liv-ex began its 100 indexes, wine has significantly out formed the leading equity indices in western markets with an average annual return of 16% per annum.” – Decanter 2010.

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