Fine wine’s asset value is not just a matter of taste... by J. Authers ( FT.com)
By John Authers
Its price tends to rise past maturity in vino veritas. Investors have always seen a measure of truth in fine wine. Like gold, it can grow in value, even if it is bought and then stored somewhere under ground. Indeed, unlike gold, it can even grow more valuable just by growing older.
Wine’s long-term value is made clear by a new academic study produced by academics from the Cambridge Judge Business School, Vanderbilt University and HEC Paris. Their work shows that as an asset class, the finest wines – taken to mean the five Bordeaux “first growth” wines of Haut-Brion, Lafite Rothschild, Latour, Margaux and Mouton-Rothschild – have outperformed assets such as art and stamps since 1900, and far outperformed bonds. But they lag behind stocks.
The academics did financial detective work using prices recorded in London by the dealers Berry Brothers & Rudd, and the Christie’s auction house. London has long been the centre for selling the greatest French wines, and both of these sources offered data stretching back to the 19th century.
They estimate that fine wines have appreciated at a rate of 5.3 per cent a year, after inflation. Taking into account storage costs brings this down to 4.1 per cent per year, which is less than equities (5.2 per cent) – but far better than returns on other “collectables” such as fine art (2.4 per cent) and stamps (2.8 per cent), and far superior to the returns on government bonds.
So the study confirms that wine is a luxury that is also an interesting investment opportunity. It is easy to see why it is bunched by some with other hard assets under the “Swag” acronym – for silver, wine, art and gold.
But what is truly remarkable about wine, is that it can grow in value, even as time erodes its taste. Great wines mature steadily over decades, but eventually turn to vinegar and become undrinkable.
Amazingly, this has no effect on wine’s price. Once a wine passes maturity and becomes antique, its price tends to rise.
As Elroy Dimson, one of the authors of the study, and an authority on equity market history, puts it, “it has become very beautiful vinegar” in the eyes of a fine wine collector.
Joss Fowler, director of fine wine for the London wine brokerage Fine + Rare, concurs. “It’s a commodity you can own but be emotional about. There’s more to it than avarice.”
He suggests that pre-war legendary vintages “still have a story to tell, even if you don’t open and drink them”. Their price, like that of unperforated Penny Black stamps, comes down to their collectable value.
More broadly, Mr Dimson and his colleagues suggest that wine’s value has three components; that of immediate consumption, the potential dividends from waiting for it to mature and its value as a collectable. This gives rise to the strange life cycle of a vintage wine price, where the rise is driven by its consumption appeal until it reaches maturity, hits a plateau and then rises to a final plateau as it is no longer drinkable, but its rarity (as other bottles have been consumed) rises one last time.
Over time, wine prices also rise in line with the growth of wealth. As more people can afford fine wine, so the cost increases. Thus wine correlates with equity markets, and is aided by growing inequality and by globalisation.
© THE FINANCIAL TIMES LTD 2014 FT and ‘Financial Times’ are trademarks of The Financial Times Ltd.
Its price tends to rise past maturity in vino veritas. Investors have always seen a measure of truth in fine wine. Like gold, it can grow in value, even if it is bought and then stored somewhere under ground. Indeed, unlike gold, it can even grow more valuable just by growing older.
Wine’s long-term value is made clear by a new academic study produced by academics from the Cambridge Judge Business School, Vanderbilt University and HEC Paris. Their work shows that as an asset class, the finest wines – taken to mean the five Bordeaux “first growth” wines of Haut-Brion, Lafite Rothschild, Latour, Margaux and Mouton-Rothschild – have outperformed assets such as art and stamps since 1900, and far outperformed bonds. But they lag behind stocks.
The academics did financial detective work using prices recorded in London by the dealers Berry Brothers & Rudd, and the Christie’s auction house. London has long been the centre for selling the greatest French wines, and both of these sources offered data stretching back to the 19th century.
They estimate that fine wines have appreciated at a rate of 5.3 per cent a year, after inflation. Taking into account storage costs brings this down to 4.1 per cent per year, which is less than equities (5.2 per cent) – but far better than returns on other “collectables” such as fine art (2.4 per cent) and stamps (2.8 per cent), and far superior to the returns on government bonds.
So the study confirms that wine is a luxury that is also an interesting investment opportunity. It is easy to see why it is bunched by some with other hard assets under the “Swag” acronym – for silver, wine, art and gold.
But what is truly remarkable about wine, is that it can grow in value, even as time erodes its taste. Great wines mature steadily over decades, but eventually turn to vinegar and become undrinkable.
Amazingly, this has no effect on wine’s price. Once a wine passes maturity and becomes antique, its price tends to rise.
As Elroy Dimson, one of the authors of the study, and an authority on equity market history, puts it, “it has become very beautiful vinegar” in the eyes of a fine wine collector.
Joss Fowler, director of fine wine for the London wine brokerage Fine + Rare, concurs. “It’s a commodity you can own but be emotional about. There’s more to it than avarice.”
He suggests that pre-war legendary vintages “still have a story to tell, even if you don’t open and drink them”. Their price, like that of unperforated Penny Black stamps, comes down to their collectable value.
More broadly, Mr Dimson and his colleagues suggest that wine’s value has three components; that of immediate consumption, the potential dividends from waiting for it to mature and its value as a collectable. This gives rise to the strange life cycle of a vintage wine price, where the rise is driven by its consumption appeal until it reaches maturity, hits a plateau and then rises to a final plateau as it is no longer drinkable, but its rarity (as other bottles have been consumed) rises one last time.
Over time, wine prices also rise in line with the growth of wealth. As more people can afford fine wine, so the cost increases. Thus wine correlates with equity markets, and is aided by growing inequality and by globalisation.
© THE FINANCIAL TIMES LTD 2014 FT and ‘Financial Times’ are trademarks of The Financial Times Ltd.
Home | Nos Offres de Caves | Nos Engagements | Achat de vin 'En Primeur' | Stockage & Assurance | Qui Sommes-Nous? | Souscrire
