ADVERTORIAL

Albany Portfolio Management, a London-based fine wine investment company specialising in classed-growth Bordeaux, explains why investors should seriously consider diversifying into this asset class.

Wine proved to be the darling investment through the formative years of this century, with a performance to make even the stoutest of stock market indices blush. From 2005 to its peak last summer, the Liv-Ex index (wine’s FTSE equivalent) leapt from 120 points to a staggering 264 – no equity or fixed income market came close.

A significant correction in the latter part of 2008 brought about some keen opportunities for speculators, and APM utilises its combined 20 years' experience to identify and source wines with significant potential for capital growth.

The underlying principles of wine investment boil down to the laws of supply and demand. The top Bordeaux Chateaux are produced in preciously small quantities, so there is limited (and ultimately diminishing) supply. Demand consistently outstrips supply through the ‘traditional’ markets of Europe and North America, but the extraordinary performance of wine in recent years may be largely attributed to the influx of new buyers from China and Russia. In short, there simply isn’t enough of the red stuff to go round.

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You can also add into the fold the fact that fine wines improve with age. As they reach maturity and optimum drinking, they become more desirable and therefore more valuable, and as the wines begin to be consumed they become even rarer, which adds yet more upward pressure on prices. Wine is generally less volatile than stock market-linked indices, and investors enjoy the security of owning a tangible asset.

There is a strong argument to suggest that wine has a low correlation to the performance of equity or fixed income indices, and affords sensible diversification. Wine is certainly a very liquid market (if you’ll excuse the pun), and realising one’s investment is much more straightforward than other asset classes.

Generally, investing in wine is free of CGT as it regarded as a wasting asset (however, this area of tax is complex and it is best to take advice from an expert). And if you keep the wine in bond, you also avoid paying VAT and duty (which we would highly recommend – there’s no surer way to ruin your investment than cracking it open after a few too many bottles of the normal stuff at a dinner party!)

With the market correction well under way (the Liv-Ex is up 4.6 per cent year-to-date), and demand from the Far East increasing exponentially, now is the time to consider a diversification into wine.

 Albany Portfolio Management (APM) is a London-based fine wine investment company specialising in classed-growth Bordeaux.