Fine wine prices edge higher
By Denise Law
Published: November 12 2009 17:46 | Last updated: November 12 2009 17:46
The market for fine wine continues to show signs of recovery, supported by a rise in demand from buyers in Asia.
Since 1993 fine wine prices have risen more than ten-fold and the asset class is now producing annual returns of around 15 per cent, according to the Fine Wines Investable Index produced by Liv-ex, the fine wine exchange.
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Hit by the credit crisis in 2008, which affected demand for luxuries across all sectors, the fine wine market has rebounded.. Last year, the market for fine wine was down 15 per cent year on year but the sector bounced back in January.
“The key dynamic driving demand for fine wine is Asia,” said Chris Smith, investment manager at The Wine Investment Fund. “China’s economy is growing at around 8 per cent per year, creating a class of wealthy people who want to consume the most famous brands.”
The Livex 100, a leading benchmark for fine wine, rose by 1.9 per cent in October, while the Livex Claret Chip moved up by 1.8 per cent.
Fine wine prices are up between 14 and 18 per cent since January, dipping just once in March.
The best performing wine selection in October was the Château Mouton Rothschild. The Mouton 1998 rose by 11 per cent to £2,300 per case.
Mr Smith said fine wine is an alternative asset class, with “little, zero and sometimes negative correlation with equity prices” and added that it is less volatile than some other asset classes because “supply naturally falls over time, causing demand to naturally rise.”
Other experts agree. Andrew della Casa, director of The Wine Investment Fund which buys stock that is at least four years old and primarily invests in wines from the Bordeaux region, said: “Fine wine has shown significantly lower volatility than gold during most of the period from 1993 and the relatively small 2008 decline in fine wine prices in unparalleled economic conditions has already been more than been made up in 2009.”
However both admit that the market ultimately depends on the consumer. During the worst of the recession, wine producers who were left with a surplus of supply were forced to sell, pushing prices down.
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