Fine Wine

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Parker’s Magical 20 wines

Chateau Cos d’Estournel
Chateau Trotanoy
Chateau Pontet Canet
Chateau La Conseillante
Chateau Pichon Lalande
Chateau Pichon Baron
Chateau Leoville Poyferre
Chateau Lynch Bages
Chateau Leoville Las Cases
Chateau Smith Haut Lafitte
Chateau Palmer
Chateau La Fleur-Petrus
Chateau Malescot St Exupéry
Chateau Clos Fourtet
Chateau Pape Clement
Chateau Rauzan-Ségla
Chateau Haut Bailly
Chateau Brane-Cantenac
Chateau Angelus
Chateau Le Gay

From an investment point of view it is also worth considering the quality of the vintage. Historically, but not exclusively, it has been the best wines from the best vintages that have provided the best returns.

 

Brand, Timing & Vintage Appeal

Bordeaux still remains the hub and apex of the investment market. The top 40 châteaux still produce a tantalisingly small amount for the world market and can offer excellent returns for the investor.

The very top Chateaux such as Latour, Margaux, Haut Brion, Lafite and Mouton Rothschild are all blue-chip estates with excellent, historical track records. Purchase timing as with any investment is essential. Dependent upon leading critics and our own views, we may recommend that you purchase an ‘En-Primeur’ portfolio which is a method for purchasing wine early. Essentially, the wines are sold as ‘futures’ i.e. before they have been bottled.

Key Benefits

Price: Typically, wines are purchased at the lowest market price. However, the 2011, 2012 & 2013 En-Primeur campaigns were fraught with overpriced wines, which will inevitably be discounted over the coming years.

Provenance: This has to be one of the greatest advantages of purchasing En-Primeur. On arrival to the UK all purchases move straight into our bonded, temperature and humidity controlled storage facility. The wines are stored securely, in optimal conditions. Furthermore, En-Primeur purchasing gives buyers the assurance that they have owned a wine since before it was even bottled and they know precisely where the wine has been stored during its entire life.

Bottle Size: We are able to request ‘rare’ special bottle sizes prior to bottling. For example, our buyer some time ago requested several 9 litre bottles of ’09 Château Pavie and sold these on to another client for £2,210.00 per bottle (June 2010). In October 2012 those bottles were sold for £4,500.00 per bottle.

Generally the finest wines from the most outstanding vintages have delivered the best returns to investors. There have been some outstanding vintages over time (1982, 86, 90, and 2000) and more recently 2009 and 2010 which have been critically acclaimed as two of the greatest vintages in living history.

The Fine Wine market today

Today the fine wine market is estimated to be worth €4bn which represents a fourfold increase since 2004. Merchants occupy 90% of this trade with the balance being auctions. As already said, the rise of new markets, such as Hong Kong and China, has driven growth in recent years. Of the US $400 million of wine sold at auction in 2010, for example some US $180 million or 40% was accounted for by Hong Kong alone.

Composition of a Fine Wine Investment portfolio

From an investment perspective the question now is: What separates fine wine from purely commercial wine?

First of all there has to be a strong demand on the secondary market. Then, it is also important that a wine has the ability to improve in bottle, that it has longevity and a record of excellence. As mentioned earlier, Chateau Lafite will last for 50 to 100 years and has an excellent reputation going back several centuries. Critical opinion also plays a role. 34 years ago, Robert Parker became famous when he rated the superb 1982 Bordeaux vintage, using his 100 point score. He helped demystify wine and bring it to a much larger audience.

Today fine wine is rated by a number of highly regarded critics, some of them specializing in certain wine growing regions only. Traditionally, only wines that score more than 90 points are deemed to be worth buying.

From an investment point of view, we are talking about a surprisingly narrow universe of wines. The top 25 chateaux in Bordeaux and a handful of properties from other regions, like the famous Burgundy domaine, Domaine de la Romanée Conti dominate. Actually 80% of a typical wine fund’s portfolio value comes from just seven wines – the five First Growths, plus Cheval Blanc and Ausone.

In 2010 Bordeaux took the lions share and accounted for 95% of Live-ex’s exchange turnover, with the five First Growths taking 52% of the trade by value. However, since the middle of 2011, we have observed a shift from the First Growths to the so called Super Seconds. Robert Parker dubbed them “The Magical 20” and according to his view these estates produce wines of first growth quality although technically they aren’t. Many of these so called Magical 20 wines – such as Leoville Las Cases, Lynch Bages and Pontet Canet saw a significant lift in demand in 2011 and 2012 and, in our view, this trend is likely to continue in the future.

Finally economic conditions also play an important role; a recent paper by the IMF demonstrated a close correlation between fine wine prices and emerging market industrial production.

The 2009 Bordeaux Vintage: An example for a compelling investment case

The 2009 Bordeaux vintage makes a compelling investment case by combining these features: outstanding vintage, choice of the right wines, high critical opinion, and strong demand on the secondary market. This chart shows you how prices have moved after Parker re-scored the wines when they went from the barrel into the bottle.

The Parker Effect: Bordeaux 2009

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