Wine investment firms are one way to gain exposure to fine wines, but are they worth investing in?
Updated Sep 20, 2022
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The world of fine wines doesn’t have to be pretentious. There’s a lot to learn about wine—from the terroir to the variety of grape to the complexity of flavor. But you don’t have to be a master sommelier to invest in wine.
Fine wines don’t follow the stock market, and investors stand to make a lot of money over the long term. In fact, wine has outperformed the S&P 500 since February 2020, according to our study. That makes investing in wine a viable alternative asset to diversify a portfolio.
But unlike stocks, fine wines must be stored in perfect conditions, or they can lose value. That’s why many investors turn to wine investment firms instead of buying bottles themselves.
So who are these firms, and what makes them so great? Uncork your chardonnay or cabernet as we taste-test the fine wine market.
You can gain exposure to wine through your existing broker account by investing in funds, stocks, or derivatives that include exposure to fine wine. Remember that investment wines serve better as long-term investments. The fine wine market is an uncorrelated asset compared to traditional investments. But fine wine investing can be volatile, and while wine tends to be a profitable investment over time, its performance in the short term can be more erratic.
Chart of the Liv-ex 1000 index (green) compared to SPX (dots) from 2017 to 2022 (ytd).
The Liv-ex 100 Fine Wine index, which follows the performance of the 100 most sought-after investment wines, shows a rise of 35% over the last five years, compared to the S&P 500 average five-year return of 60%. The Liv-ex 1000 Fine Wine index fared slightly better, at 47.4%.
Part of that discrepancy might be because the fine wine market is changing. In 2010, Bordeaux had the most significant market share of fine wine at 95.7% of the total trade by value. Today that share is just 34.1%. Investable wines aren’t just those from France and Italy but wines from Australia, the U.S., Spain, Argentina, and even New Zealand.
Market share of fine wines by region from 2010 to 2022 (ytd).
Source: liv-ex.com
The growth in fine wine investing has led to an increase in wine investment funds. Many are private, so there’s no public data on their performance. Fine wine funds work a bit like a mutual fund. Investors pool their money together, and portfolio managers then buy, hold and sell wine bottles (usually investment grade wines like Bordeaux) to maximize gains. These managed accounts are generally only available to accredited investors.
Sommelier Capital, for example, is limited to accredited investors and only offers opportunities to institutional investors. The wine fund aims to establish market exposure while also trying to outperform other participants in the wine market. They only draw their portfolio from 1% of the global network of wine producers, which they claim are the best and most liquid. Wines are then sold at their peak value and are carefully analyzed to find opportunities for market demand.
UK-based Wine Investment Fund works with private investors, institutions, and financial intermediaries to invest in Bordeaux wines. They claim to have yielded their investor's excellent returns but show a NAV (net asset value) of just 2.41% since it launched in 2013.
Cult Wine Investment takes an active approach to fine wine investing using AI-driven data. While it’s open to non-accredited investors, it does require a minimum $10,000 investment. The company creates a personalized portfolio for investors and then allocates the fine wine to its insured warehouse in the UK. The company boasts a five-year return of 45.41%.
There are other ways to invest in wine besides investing in wine funds. You can buy bottles directly yourself, but you’ll need to pay for wine storage in a professional wine cellar to ensure your wine portfolio doesn’t depreciate. It’s also important to account for capital gains taxes that you'll likely need to pay if you sell your fine wine. Alternatively, you can invest in wine stocks or through wine investing platforms.
Wine stocks are a way to invest directly in companies in the wine industry. Investing is easy as long as you have a brokerage account. Unlike most wine funds, you don’t need to be an accredited investor to buy stocks of a beverage company. However, you will be exposed to market conditions and potential market volatility. Here's a list of some of the best-known wine companies.
Constellation Brands is an American Fortune 500 company that produces wine, beer, and spirits. It’s one of the largest beer import companies in the U.S. by sales and has investments in the cannabis sector. Its portfolio of over 100 brands includes wines like Robert Mondavi, Meiomi, Ruffino, and The Prisoner Wine Company.
The fashion house doesn’t just own luxury designer labels like Louis Vuitton, Tiffany & Co., Marc Jacobs, Givenchy, and more, but also owns prestigious Champagne producers Veuve Cliquot and Moët. The company's performance has been good in recent years, but its stock is influenced by other subsidiaries in its portfolio, as well as other retail factors.
If you don’t want to deal with storage or aren’t even sure where to begin buying investment-grade wines, then you can try investing in wine passively through platforms. Unlike investing directly in a wine investment company, these platforms offer liquidity through a secondary market, and some even let you build your portfolio yourself.
Wine investing platform Vint is great for retail investors just starting to invest in fine wine. You can invest in curated collections for just $50 a share. Each wine collection is curated by master sommeliers in the wine business who source the best bottles from top wineries to create a diversified portfolio. The wines are kept in insured climate-controlled storage facilities. You receive your funds when Vint decides to sell the asset in three to seven years.
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Vinovest makes it easy to collect your bottles, leveraging the help of wine experts around the globe. Your investment wine is stored for you, but you can ask to have your bottles shipped to you at any time. And with the Vinovest Exchange, you can take a hands-on approach to investing in fine wine, selecting bottles, and deciding when to buy or sell. It’s like a stock market for collectors, investors, and wine enthusiasts.
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With collectible investment app Rally, you can buy shares of fine wine, whisky, books, luxury watches, and even dinosaur bones. The app turns collectible assets like Pappy Van Winkle Bourbon or Marvel comic books into securities, making it easier for retail investors to invest in wine, whiskey, and even Bored Ape NFTs. It’s also very liquid as you can sell your shares on Rally’s secondary market.
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