Investing in Fine Wine

The idea of building a cellar for future financial gains is by no means a new phenomenon but has picked up a great deal of interest in recent years. Many clients use wine investment as a means of diversifying their portfolio and enjoy the idea of having a physical asset in their name rather than shares on paper. Another strong advantage of investing in wine is the growing international demand that doesn’t rely on a single market for returns. This has made wine a far more consistent asset class with average growth of 13-15% cumulatively per annum over the last twenty years.*

How does wine investment work?

Wine investment works on decreasing supply and increasing demand. Great vintages from top regions such as Bordeaux and Burgundy are being bought and consumed leaving diminishing amounts of great vintage wine available. The increasing demand for luxury products such as fine wine in emerging BRIC (Brazil, Russia, India and China) countries has boosted the steady trend of buying in traditional economies such as Europe and North America. Now that fine wine has truly become a world-wide passion, the pressure on existing supply continues to increase.

Buying the best possible wines at the best possible prices. Top wines such as Grand Cru Classe as defined from the 1855 Bordeaux Classification system and top red Burgundies are the investor’s wines of choice. There is not a wide array of wines to choose from and indeed you will hear the same names coming up when discussing investment-grade cases: Ch Lafite, Ch Latour, Ch Cos d’Estournel, Ch Lynch Bages, Ch Pontet Canet and from Burgundy Domaine Romanee Conti and a few select others. Other regions to consider are Italy’s Barolo, Brunello and top Tuscan regions as well as a few select New World producers.
Getting the best price is essential. Justerini & Brooks succeeds in being at or below average market values whenever possible offering our clients some of the best pricing in the UK.

Provenance and Storage. Buying from trusted merchants and building a relationship with them is essential. When buying for investment you must ensure the wines you buy are in excellent condition and in original cases. The status of investment-grade wine should always be “under bond” therefore exclusive of VAT and held in a secure, bonded storage facility.
All wines bought from Justerini & Brooks are stored in Octavian Cellars, an underground storage facility in Wiltshire which is the most secure possible site in the UK. It is unaffected by external weather conditions, temperature-controlled and we employ our own staff to exclusively look after all of our stocks. All wines bought from us are stored under your name and physically separate to our own stocks.

Minimum funds. There is no maximum on buying wine but we recommend a minimum of £5-10,000 to start building a reasonably-sized portfolio. This amount will allow you to have a more flexible, balanced selection of wines which can help in maximising your potential returns. The wines that are of high enough quality to have investment potential start at around £1,000 per case of twelve bottles and can go up to over £80,000 per case.

Wine investment and taxes. All wines bought for investment are stored under bond, meaning the duty and VAT is suspended and not paid on purchase or sale. According to HMRC, wine is considered a “wasting asset” as it has no useful life beyond 50 years and therefore any bought and accumulated by private individuals is not subject to Capital Gains Tax. We recommend that prior to investing in wine you do speak to an IFA – Independent Financial Advisor or visit www.hmrc.gov.uk as we are not a financial institution and do not give financial advice. We do not offer any guarantees of a wine’s potential future growth however we can advise on a wine’s suitability to building an investment portfolio. Wine investment like any other asset class can go down as well as up in value.

fine wine investment advice

Key Principles

  1. Wine investment should be looked at as a medium to long term potential gain (five to ten years).

  2. Only buy from trusted and well-established wine merchants and never be drawn in by cold callers.

  3. Buy at the level of risk you are comfortable with as there are low, medium and high risk investment cases which all offer varying levels of potential return.

  4. Buy cases under bond whose provenance is guaranteed and keep them stored under bond with a professional facility such as Octavian cellars.

  5. Diversify your portfolio. Trends can come and go and having all your holdings in one or two wines is a risky strategy.

Why invest with Justerini & Brooks?

Reputation. We have longstanding relationships with clients and suppliers going back over two centuries which we continue to build on. We have the exclusive agencies of some of the greatest Burgundian and Italian producers and connections with Bordeaux that pre-date the 1855 Classification system.

Fees. There is no “management fee” of your portfolio. Instead you buy your wines and will annually pay for the storage and insurance of your wines held under bond. The current cost is £12/case/annum and this includes insurance to the full current market value of your wine.

Broking services Justerini & Brooks offers one of the most competitive broking services in the market. Due to our international client base and global demand our track record has typically shown swift and efficient sales. If you choose to sell your wine through us, there is a 10% broking commission on the sale of goods of which you will receive 90% net of the sale price.

Dedicated account managers. Your portfolio will be maintained by a professional account manager who will be your primary point of contact for any questions or concerns. We are here to advise on the best quality and prices of investment-grade wines and will be on hand to discuss the market at any time, in terms of buying and selling.

 

For more information or to have an initial discussion on wine investment please call us on +44 (0)20 7484 6400 or email investment@justerinis.com

 

* According to Liv-ex data, Liv-ex Investibles index from 1988 to Feb, 2011. CAGR 14.26%