RALLY GUIDE TO WINE
03/14 – Words: Will Stern
What to look for when investing in wine.
When it comes to investing in the world of fine wine, there can be a bit of a learning curve. Fancy words and long-standing traditions look intimidating to the many investors unfamiliar to the asset class.
But like sports cards, video games, or other alternative asset classes, there are some basic terms and fundamentals that anyone can use to get a handle on the category to make more informed decisions.
HOW TO MEASURE PERFORMANCE
In order to measure the performance and historical trends in fine wine, a database of standardized transactional price data called Live-ex is the industry leader.
Liv-ex creates indices that help illustrate the performance of the market as a whole as well as more individualized sectors. One of the most important of these is the Liv-ex Fine Wine 1000 which gauges a broad measure of the market using a basket of 1,000 wines from around the world.
Using this index one can compare and contrast the performance of various regions which make up the broader index. For example, the market for Burgundy has outperformed all other sub-indices over the past few years while wine from Rhone has fallen far below the market.
THE MARKET AT A GLANCE
The fine wine market has a long track record of stability, steady returns, and a low correlation to equity markets.
From 2007- March 2021, fine wine was a less volatile investment compared with assets like Gold and the S&P 500, while producing competitive annualized returns.
As an instrument for diversification, fine wine has shown to have a lower correlation to the S&P 500 than other alternative investment classes like US Real Estate and high yield corporate bonds.