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The Beginner's Guide to Wine Investment Funds


How to invest in fine wine.

Drinking wine has been a pastime for thousands of years as people from various periods in history have all enjoyed this alcoholic beverage. Today wine remains an incredibly popular drink, but it has also developed into something else: An investment. There are now a number of people who will invest in wine for its potential to appreciate with time, allowing the owners to sell at a profit. Generally, as wine starts to age, it becomes more coveted by the market, pushing its value higher (note that this only works with certain kinds of wines; your two-buck-Chuck will not fall under this category).

It may seem like a strange investment to some, but to the connoisseurs out there, this has quickly become a lucrative investing option. The idea behind wine investing started with individuals growing wary of volatile stock markets and all of the price drivers that can tinker with your portfolio. Wine remains almost entirely separate from financial markets and will always be in demand all over the world. Whether it's with a nice meal or just a relaxing evening, enjoying a glass of wine is a global phenomenon and the most savvy investors have found a way to cash in on this trend.

Wine Investing: Advantages and Disadvantages

There are a number of pros and cons when it comes to placing your capital in a nice bottle of wine. Starting with the pros, one of the biggest draws to this asset is the fact that there is no underlying financial market to tinker with prices. There will never be a bad trade or a flash crash that will suddenly erase the value of your investment. Another big plus is the fact that you will physically own the bottle or bottles, meaning that you can ensure of their proper care and proper storage as opposed to placing your money with a broker or financial advisor. Wine also has the potential to appreciate with time. Though it is not a guarantee, as wine ages it often becomes more valuable as a well-aged wine is a highly sought-after asset among serious collectors.

The disadvantages of wine start with its liquidity (no pun intended). It is not as if you can walk up to your computer and simply sell your bottle of wine within seconds; moving a nice bottle takes time and effort, a luxury that not everyone has. Along those lines, learning about wine and getting a firm understanding of the industry is another major time commitment as there a number of nuances to grasp and things to watch out for like counterfeit bottles and such. Another major disadvantage is ensuring the safe storage of your wine, as improper caring for a bottle can not only destroy its contents but also its value.

The Most Expensive Wines

Still not sold on how a bottle of fermented grapes can be worth a lot of money? Check out the following list of some of the most expensive wines in the world.
  1. Henri Jayer Richebourg Grand Cru: This wine comes from Cote de Nuits in France and the average bottle goes for $14,395. These bottles have even sold for as much as $22,976.
  2. Domaine de la Romanee-Conti Romanee-Conti Grand Cru: Hailing from the same French region, these bottles have an average price of $11,823 with a max of $38,500.
  3. Henri Jayer Cros Parantoux: Another French creation, the average bottle price for this wine falls at $5,436 with the max price topping out at $13,261.
  4. Domaine Leflaive Montrachet Grand Cru: You guessed it. Another wine from France that fetches $5,264 for the average bottle with its price maxing out at $8,478.
  5. Egon Muller-Scharzhof Scharzhofberger Riesling Trockenbeerenauslese: If you hadn't guessed from the name, this wine hails from Germany and averages $5,247 per bottle with a nice max price of $13,261.
Wine Investment Funds

For those who do not wish to actually invest in the wines themselves, or simply do not feel that they have the expertise to make a sound buy, there are a number of wine funds that allow investors to simply make a capital distribution in exchange for exposure to some of the best wines in the world.
  • The Vintage Wine Fund: This fund comes from a company based in the Cayman Islands, but it is managed on a full discretionary basis by OWC Asset Management Limited, a London-based wine investment management company regulated in the marketing of the Fund by the Financial Services Authority. The fund is denominated in euros and requires a minimum investment of 100,000 of said currency, reserving for only the most serious investors who have capital to spare.
  • Fine Wine Fund: Ran by Wine Asset Managers LLP, this fund has an impressive track record to reel in investors. According to their website, "at the end of April 2012, the Fine Wine Fund has returned 38% since inception in September 2006 at an average rate of 6% per annum net of all fees." That means that this fund has outperformed the S&P 500 and the FTSE 100 over the same time period, giving much more weight to this niche fund. The firm offers two different products, one aimed for individuals and one aimed for institutional investors.
  • Wine Growth Fund: Another euro-denominated product, this fund comes from the wealthy nation of Luxembourg. There are three classes of the fund, each with hefty minimum investment requirements. Class A requires a minimum allocation of 125,000 euros while classes B and C ask for 500,000 and 5,000,000 respectively.
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Editor's note: This article by Jared Cummans was originally published on Commodity HQ.
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