When it comes to alternative investments, fine wine is an excellent choice for steady, medium to long-term returns. As an asset, fine wine is produced in relatively low quantities; accounting for less than 1% of the total volume of wine produced globally every year. This, coupled with the fact that it increases in both quality and rarity over time, makes it a highly valuable commodity for investors. As of 2019, the size of the world finance market globally was estimated to be approaching £3bn, with the thriving secondary markets accounting for approximately £1.5bn, or 50% of this total. This growth is in part due to new investment from emerging markets, such as Asia and the United States, joining a market that has traditionally been very Eurocentric. Two major sources of investment in recent years have been the investments made by Emirates and the Chinese government.
Emirates has invested heavily in fine wine over the past few years; in 2018 alone, the company spent 120 million Euros on fine wine, predominantly from France. This represents a significant investment from an airline that runs over 30 flights a week out of France. They have also set up an airline-exclusive deal with famous champagne producers Dom Perignon, serving their ultra-rare 2008 vintage to first class flyers until the end of the year.
Emirates have even gone above and beyond the typical level that some airlines and other luxury service providers tend to invest at. Companies such as those mentioned tend to purchase their wine through tenders, whilst Emirates is dedicated to establishing ongoing relationships with a number of the leading French wine regions, such as Château Montrose and Margaux. Once these wines have been purchased, they are stored and aged in Emirates’ own wine cellar, the largest one of all airlines in the world which currently houses over 7 million bottles of fine wine. Since 2006, the airline has invested almost $1billion in the fine wine market, and their cellar is holding bottles that will not be opened until 2035. This certainly represents a significant statement of intent when it comes to the airline’s commitment to fine wine as both a commodity and an investment opportunity.
Although lower in gross monetary amount, the statement that the establishment of the first Chinese investment fund makes is perhaps an even larger one than that of Emirates’. The Dinghong Fund is available to potential Chinese investors looking to purchase vintage wines from Bordeaux and Burgundy, the regions which account for largest market shares of fine wine industry, at 70% and 12% respectively. Asian investment has been key to the growth of the market overall in the past decade, and in fact the relative success of the market in the wake of the 2008 financial crash was chalked up largely to this phenomenon. You can recession proof your portfolio and restructure your portfolio with UKV International where they will store your wine and provide a complete service.
Fine wine has regularly outperformed traditional investment avenues such as equities and gold over the last 30 years and is becoming a popular “recession-proof” asset for many investors, especially in today’s worrying financial climate in the wake of the COVID-19 pandemic. The aim of the new Dinghong fund, according to the Chinese government, is to achieve a yield of around 15% return on investment; raising approximately 1 billion Yuan. The minimum investment has been set at 1 million Yuan and will allow investors to choose both bottled and “en primeur”, or still aging, wine. It is being marketed to Chinese investors as a risk diversification enterprise, which is unsurprising given the performance of fine wine mentioned above, and the fact that some bottles carry a resale value of up to 100 times their original price at time of bottling.
A spokesperson from UKVInternational said, “It is clear that the world is beginning to catch on to just how stable an investment fine wine represents”. The hospitality and travel industries predicted to falter massively following the financial fall-out of the COVID-19 crisis, however, with a cellar full of bottles of investment grade wine, companies such as Emirates are guaranteeing that they can hold on to a certain amount of capital that will continue to grow while the global economy recovers. Additionally, it appears that fine wine continues to be a commodity whose value is only increasing across the globe, especially in the massively influential Chinese investment world. Expect the size of the market to continue to grow as more and more companies, corporations, and national economies all begin to wake up to the risk-free nature of fine wine investment.