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The W in S.W.A.G

The W in S.W.A.G

Investing in wine is not quite the clear-cut playing field it once was. Hitherto, with rising global demand, limited supply and the chance of a primeurs-time discount, one could load up with top claret and wait for it to rise in price.

The time to maturity of one’s investment is and always has been more-or-less the time to maturity of the underlying commodity for the simple reason that, when a wine is ready for drink, a proportion of its owners will get busy with the corkscrew, thereby diminishing the global stock of that asset. The aforementioned rising demand would push prices ever northward.

Now?

Nowadays, many of the top Bordeaux properties (i.e. those in demand, vintage-in, vintage-out) are owned by big multinational corporations such as Artemis, LVMH and AXA, and are held as corporate investments. The requirement for an annual income stream in no longer a necessity, whilst brand positioning is now all-important. This means that (as with the property market and buying off-plan), forking out hard cash in “futures” no longer secures one a deal.  At the same time, climate change has resulted in ripe, attractive wines being produced most vintages, to some degree offsetting that supply/demand imbalance.

But all is not lost...

Investing in wine is still an attractive prospect. With some limitations, returns on wine investments are free from capital gains tax. And for those with an interest in the subject, those investments that don’t produce satisfactory returns leave one in the entirely satisfactory position of being able to take one’s revenge with a waiters’ friend and a degree of leverage.  

Bordeaux

Whilst primeurs in Bordeaux may be an investment opportunity somewhat in the doldrums, there are still chances to make returns. Chateau owners experience generational or management changes, with new blood determined to push quality to its limits.

One instance of a regime change can be seen at Chateau Figeac in St Emilion. Sharing a plateau with such luminary names as Cheval Blanc, Vieux Chateau Certain and Petrus, Figeac was long drifting in a self-imposed quality wilderness, not really living up to its potential. However, changes in management have given rise to a leap in quality and Figeac is now back where it should be: a sui generis, much-lauded wine at the pinnacle of its commune.

Champagne

All wine investment portfolios should contain a proportion of top champagne. The best vintages of the best wines simply rise steadily in value as they age.  

Burgundy

Burgundy is of real interest. Securing the top names can prove to be quite tricky. The volume of wine produced by any one address from a specific vineyard is usually woefully small, whilst demand is at an all-time high.  However, once again opportunities arise as offspring take over from their parents and begin a process of reinvigoration. A recent example is Domaine Coquard-Loison-Fleurot (CLF). Situated in Flagey- Echézeaux it has “arrived” on a wave of excitement.

As Neal Martin, MD of vinous.com, commented, “…Coquard-Loison-Fleurot wines are now in high demand in more and more areas of the world. This is however in my view only the beginning - as these wines here are truly magnificent...demand for the wines is now growing rapidly…” These are wines that I have been sourcing for my investment clients.

Beyond France

Opportunities exist outside France, too, with senior wines of Tuscany and Piedmont all climbing in value with time. A smattering of Spanish wines and an example or two from Australia round out one’s portfolio very nicely.

Buy what one likes and keep your corkscrew handy

As with all investments, a spread of risk is sensible. And it helps to buy what one likes; remember the comment about revenge above?  If one already has a range of investments, adding wine can bring a certain amount of colour and enjoyment to one’s speculating. It’s something I’ve been doing for years and will continue to do so.

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