Encarta Fine Wines - Press 4

Fine wine prices to continue to rise during 2010
14 January 2010

Fine wine prices continued to rise during December, with the main index, the Liv-ex 100, increasing by 0.9 per cent during the month and the Liv-ex Claret Chip up by 0.7 per cent.

These increases gave annual returns for 2009 of 15.7 per cent and 19.4 per cent respectively.

There were some exceptional increases for fine Bordeaux vintages during 2009. Chateau Lafite 1999 outperformed all wines and virtually any asset class, rising by 125 per cent during the year, up from £2,000 per case to £4,500.

In December, the strongest performer was Chateau Mouton Rothschild 1996, with an increase of 9.5 per cent to £2,600 a case.

Andrew della Casa, director of The Wine Investment Fund, believes prices for this Chateau have further to go in the coming months. ‘Stocks of maturing wines like Mouton 1996 are becoming scarcer as they are drunk and appreciated by consumers around the world.’

Demand from Asia for fine wines is continuing, with no sign of abatement. Hong Kong is now the second biggest wine auction market after New York. It has achieved this from a standing start in 2007, overtaking London in the process.

The New Year is likely to get a further boost through further demand ahead of the Chinese New Year. The Year of the Tiger begins on February 14 and a few western wealthy romantics might also be buying the same fine wines to celebrate the same date.

The release in the spring of the much-anticipated 2009 vintage from Bordeaux should concentrate the minds of investors on earlier vintages. There is speculation that 2009 could attract record prices.

Della Casa added, ‘If the en primeur prices do achieve new records, this will highlight the good value available among established, more mature vintages and should further enhance prices for these vintages. We saw exactly the same effect after the 2005 vintage was released.’

The Wine Investment Fund predicts that the main fine wine index will rise by 18 per cent during 2010. The fund itself outperformed the indices in December by producing a return after all fees are taken into consideration of + 1.0 per cent.

Fine wine prices are much less volatile than most other investments. During 11 out of the 12 months of 2009 there were gains on the Liv-ex 100. The single fall was in March when it dropped 1.2 per cent.

This stability and the fact that wine prices tend not to track equity and bond prices, make them an increasingly popular part of a diversified investment portfolio. ‘Sharpe ratio’ statistics - which show risk-adjusted returns - clearly demonstrate that fine wine continues to outperform most other investments on this basis.