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How to Structure a Wine Investment Portfolio

Lady browsing WineCap site on laptop

A great deal can and has been written about how to structure a wine investment portfolio. Just Googling ‘Modern Portfolio Theory’, ‘Post-Modern Portfolio Theory’, or the ‘Efficient Market Hypothesis’ makes it clear that a few hundred words can only scratch the surface.

At times we may recommend – or clients may wish for greater exposure – to a particular sector. However, the common belief is that the best practice is to hold a good spread of assets and a good spread of asset classes. One of the (many) advantages wine has to investors is its relative simplicity and that it lends itself to fairly easy portfolio structuring.

Here are some things to consider when thinking about how to structure a wine portfolio: 

  • Know your goals & understand your timescales. You want to be able to take as much advantage as possible of wines’ ability to improve as it ages. As attractive as we think 2019 Bordeaux is, if you’re looking at a short hold it might not make sense to invest in En Primeur wine if its drinking window may not line up with your timescale.

  • Understand the veil of ignorance. While predictions can be useful, the future cannot be certain. Unless you have a functioning crystal ball, it’s good to have a reasonably broad selection. Hold a spread of regions, vintages and price points, but also keep an eye on holding varying formats too.

  • Don’t focus solely on the highest pinnacles when considering how to structure your wine investment portfolio. Oftentimes it is less heralded wines or vintages that outperform the market. Naturally, you’ll want to hold some tip-top wine, but make space for the less than stellar and perhaps even the objectively bad vintages. If you’re looking at well-priced examples of the best brands, there’s no reason to avoid off vintages on principle, Lafite 2007 and 2013 being great examples.

  • Have some flexibility. When building a portfolio we always have half an eye on the current shape of the wine market but it’s easy to be overly focused on sticking rigidly to a planned portfolio structure. Will it make a difference to your portfolio if you’re at 20% Burgundy or 25%? Probably a bit, but it is not going to be night and day.

It’s hard to know exactly what different sectors of the wine market will do in the next 12-24 months, but if you do your research and ensure broad holdings you can structure your portfolio for long-term stable growth. Want to talk to one of our experts about creating a wine investment portfolio in more detail? Schedule a call here.

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How does Wine Investment Work?

Two men drinking wine and looking at a laptop

Are you considering investing in wine and want to know how wine investment works? Congratulations, you are just one of the growing number of people who know that fine wine is a top performing alternative investment. Inflation hit 7% in April 2022 in the UK according to the Office for National Statistics (ONS). And it says it’s set to increase. Any serious investor should consider fine wine as an investment.

So, how does wine investment work? Here’s our recommendations:

-Buy with a medium to long-term view. Wine investment’s central idea is that it is an improving asset in diminishing supply. As time passes and the wines become rarer, they will be harder to find. This is why it’s always wise to enter the market with the intention of holding wines for a minimum of five years.

-Choose how much you want to invest and then diversify your wine investment portfolio. Select wines from different countries and regions for a balanced portfolio. We’d advise starting with traditional and well-established regions, such as Bordeaux. Many seasoned wine investors add a range of wines from different countries to their portfolios to create a spread.

-Make sure your wines are stored professionally. Perfect provenance of fine wine secures its value and desirability and is absolutely critical when investing or selling. A wine’s authenticity must be documented and assurance of proper storage should be available. WineCap stores all its wines in government bonded warehouses.

-Be in the know about fees. Some brokers charge an annual fee that’s known as a management fee to handle your portfolio. We pride ourselves on not charging one and also having the lowest brokerage rates.

-Prepare your exit strategy. When the time comes to sell your investment, there are a number of avenues you can go down. As your investment broker, we would advise you on the best route to take based on your wine’s position on the market at the time. Options include selling to wholesalers, private sales and auction houses.

Ready to start investing in wine? Find out more by scheduling a free call with on of our experts.

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Asian Buyers make up 65% of the World’s Total Drinks Buyers

Asian lady selecting a bottle of wine from her cellar

Asian buyers now make up 65% of the total wine and spirits buyers in the world. That’s according to Sotheby’s 2020 Wine Market Report. Asia’s demand for the world’s finest wines looks set to grow too, as 2020 was the second highest percentage on record for Asian buyers, after 68% in 2019.

There are multiple factors that can be attributed to Asia’s growing market share of the total wine and spirits market. The Coronavirus pandemic had a direct impact on drinking habits last year. Unable to visit restaurants and bars, China’s wealthy citizens began opening bottles of some of the finest wines from their cellars at home.

An international travel ban and lockdowns across China also meant that those who usually would have travelled abroad on holiday, opted instead to spend their money on buying top wines such as Domaine de la Romanée-Conti: a producer that represented 20% of all wine sales at Sotheby’s last year. However, while Bordeaux and Burgundy producers still make up the top ten names in Sotheby’s annual producer rankings, Asian buyers are looking further afield to regions such as Napa, in order to discover new wines such as Harlan Estate, Sine Qua Non and Colgin Cellars.

The future for wine imports into Asia, particularly into China, looks very promising. 2.25m nine-litre cases were imported into China in 2006 compared with a colossal 50.5m cases in 2019. Although there was a slight drop in the number of cases imported in the past two years, the trend for increased wine consumption looks set to continue. This is due to a combination of wine enthusiasts having opened bottles from their cellars during lockdown, as well as the disruption caused to supply chains to mainland China by the Hong Kong riots having ended.

As more and more Chinese cities open up – such as Shanghai – on-trade sales of fine wine are beginning to blossom, as consumers celebrate the easing of lockdown restrictions. With such strong figures from Sotheby’s recent report, all eyes remain firmly fixed on Asia with big expectations for this wine market that shows huge potential for growth.

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Can you Invest in Wine?

Rows of vines in a vineyard

Investing in wine used to be intimidating. It was also considered only for the rich. Fortunately, things have changed. Wine investment is available to everyone and anyone who is looking for a stable alternative investment. It has – and continues to – deliver consistent returns. The category went up +13% from June 2020 to June 2021, according to the Knight Frank Luxury Investment Index. What’s more, only a modest amount of up-front funds are required to begin building your portfolio. While we always recommend speaking to one of our investment experts before getting started, fine wine is considered to hold fewer risks and more advantageous gains than nearly any other financial or alternative asset category.

Our Top Five Reasons to Invest in Wine

One: Fine wine has a low correlation with gold, oil and global financial markets. It has delivered consistent compounded growth of 10% over the last 30 years. By diversifying your overall investment portfolio with wine, you could add a safe investment that could bring stability and profits, regardless of the economic climate.

Two: It’s a tax-free investment with no Capital Gains Tax. Those who leave their cash in UK bank accounts will see their money eroded over time by inflation. Inflation is currently running at 4% in the UK at the time of writing and those wanting to make the most of their savings should seriously consider taking advantage of the tangible investment options out there.

Three: Fine wine is an improving asset in diminishing supply. The more corks that are pulled over time, the rarer the wine is and therefore the harder to find.

Four: Investing in wine is best when held for a mid to long-term investment period. The longer wines are held, the more opportunity you could have for higher returns.

Five: Perfect provenance of fine wine secures its value and desirability and is absolutely critical when investing or selling. Provenance is 100% guaranteed when you buy from us. All our wines are professionally stored in government bonded warehousing.

Find out how to get started investing in wine: Schedule a free call with one of our experts.

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“I have always been impressed by their professionalism and their competitive pricing. I have trust and confidence in WineCap”

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“I am a new investor to the wine industry and in Martin and WineCap I found an informative and exciting guide”

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How does Investing in Wine Compare to Similar Asset Classes?

Old wine bottles in a rack

Wine is part of a group of investments collectively known as ‘treasure assets’. These include things like art, jewellery, antiques, watches, antiquities, toys and classic cars. Those considering investing in wine as part of their wider portfolio often do so in the context of these other treasure assets, so it’s worth understanding the similarities and differences. While we wouldn’t want to discourage anyone from investing in other sectors, these differences illustrate why we think wine is the best option for most investors when it comes to treasure assets.

Investing in wine: its similarities to other asset classes

Product homogeneity: a homogenous product is one that cannot be distinguished from another and that can be easily substituted. While wine isn’t perfectly homogenous, it’s certainly close. As far as the market is concerned, one case is essentially the same as any other. It’s a different situation with most other treasure assets. The value of one Monet painting will tell you relatively little about the price another will fetch. Even with industrially manufactured products such as classic cars, their condition, mileage and service history can have an outsized impact on pricing and desirability.

Established storage and logistics: while it’s increasingly common for art to be stored in free ports and for classic cars to be kept in professional storage facilities, wine still has an advantage here. There is a long-established global network of affordable wine storage facilities that ensure a wine’s provenance is documented, as well as keeping it in top condition. Should the owner wish to stop investing in wine and drink it, final mile delivery can easily be arranged.

An established marketplace and data: in 2021, data on the performance of wine as a collective and on individual wines is relatively easy to obtain and to track. Thanks to product homogeneity, WineCap is able to provide valuations quickly and easily, allowing investors to know at any point, exactly what their wines are worth. Wine also has well-established marketplaces and a relatively low transaction cost. In comparison, art is usually sold at auction houses which command high fees, 20-30% is not unusual once all costs are considered, or in galleries where markups can be 50% or more. Costs to use online wine trading platforms or merchants such as WineCap are significantly lower.

Low cost: when compared with other treasure assets, even investing in wines that are at the top-end is somewhat affordable. This is one of the reasons why prices are generally robust and unaffected by the global economic climate. Imagine someone who regularly buys investment-grade wine; a financial crash might put them off buying a £20m Ferrari 250 GT LWB California Spider, but will it deter them from taking up their annual allocation of £15,000 Domaine de la Romanée-Conti?

Low cost of ownership: a Ferrari F40 has to have its fuel cells replaced every ten years and the parts alone for that one item could run to £30,000. If the batteries in your Mclaren P1 need replacing, that’s £100,000. A case of wine, regardless of value, shouldn’t cost more than around £15 a year to keep in perfect condition.

An improving asset in diminishing supply: there’s no other asset in this class that both improves and becomes rarer with age. This advantage is unique to fine wine.

Above all, the argument for wine is fundamentally one of investment returns. The graphs above show that, over the long-term, wine has comprehensively outperformed both the treasure assets it is most similar to, as well as more mainstream assets. We believe there is a place for investing in wine in any portfolio.

Want to find out more? Schedule a free consultation with one of our wine investment experts.

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Invest in Wine with Confidence now that we have a Brexit Deal

Old bottles of wine on display

Investing in wine is more straightforward now we have a deal

Ever since the UK voted to leave the European Union in 2016, trade talks and negotiations between the two sides had been full of uncertainty, posturing and brinkmanship which at times made it feel like a deal was unobtainable. So, the news that a trade deal – now ratified by the UK Parliament – had been struck on Christmas Eve in 2020 was met with welcome relief across all industry sectors on both sides of the Channel and especially by those looking to invest in wine.

1. The costly VI-1 import documentation for UK and EU wines is no longer going to be introduced in July as previously planned. Taking its place will be a straightforward Wine Import Certificate which asks for basic producer and product information. This means far less admin and fees for wine importers, which in turn means no extra costs will be passed on to customers.

2. Crucially, wines will not have to undergo lab assessment for the new Wine Import Certificate. Submitting wines for lab analysis would have caused backlogs of wines which would have created frustrating shipment delays.

3. While UK wine importers are going to have to get to grips with new processes and forms over the coming months, this is just part of the anticipated bedding-in period which will become second nature as time goes on and as new processes are established.

With the previous uncertainty around Brexit having disappeared with the end of the transition period and with the years to come looking as though they’ll mirror previous years of healthy returns for fine wine, contact us to speak to one of our advisors about creating your portfolio to invest in wine.

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Bordeaux En Primeur 2020: First Impressions

Barrel room at Chateau Cos d'Estournel

The Bordeaux En Primeur 2020 campaign is well underway and the general consensus from the trade and from critics is that this is an excellent vintage, the third in a row:

‘We have a reputation in Bordeaux to say the last vintage is the best one. But we did with 2018, 2019 and now 2020… after we did our tastings in the spring I can say it is a really great vintage. It is different from 2019 with more freshness, more tension, more balance. It’s a good one. Maybe a bit less powerful than 2019 but it made really great wine. I think that we can call it a trilogy now (three consecutive high quality vintages: 2018, 2019 and 2020).’ – Michel Rolland in conversation with James Suckling

Ahead of the Bordeaux En Primeur 2020 campaign, we’ve all been expectantly waiting to see how this year’s prices compare to 2019’s, as last year’s prices were considerably lower than previous years, due in part to the ongoing global pandemic that caused significant disruption, especially when it came to mass tastings being cancelled. Initial releases have come in either at the same price as last year or slightly higher. Increased prices are due largely to volumes being down some 25% on the year before.

The quality of the vintage has been declared as very good to excellent and the wines that have been released so far have commanded varying scores that range all the way from very good to 100 points.

As Jane Anson writes in Decanter: ‘Bordeaux 2020 is a year of contrasts, so it favoured terroirs that are best able to cope with the changes – and winemakers who were able to follow closely and help their vines adapt.’ There are some stunning wines being released and those who have done their research will reap the benefits. For expert advice, schedule a call with one of our investment analysts.

Interested in reading the Bordeaux En Primeur 2020 report in full? Access it here.