NEW YORK & LONDON--(BUSINESS WIRE)--According to a report released today by analysts at leading fine wine investment company Cult Wines Ltd, fine wine’s performance during periods of economic deterioration compares favorably to the performances of equities and gold during the same period, demonstrating distinct defensive qualities that can insulate investors from some of the risks inherent in an equity-based portfolio.
In Exhibit 6 of the report, “Fine Wine vs. Global Equities,” Cult Wines analysts demonstrate that the performance of the Liv-ex Fine Wine 1000 — an index tracking the prices of 1,000 wines from top wine-producing regions around the world — compared favorably to those of the FTSE All Shares index and gold futures, both during the depths of the financial crisis (2008-10) and during the peak of the economy recovery that followed (2015-17).
Between 2008-10, the Liv 1000 returned a little less than zero, whereas the FTSE All Shares lost about 25% and gold futures fell nearly 5%. Over the period spanning 2015-17, on the other hand, the Liv 1000 returned 10%, while the FTSE All Shares returned roughly 9% and gold futures 8%.
Among the factors contributing to fine wine’s strong recent performance:
- Limited Supply of Fine Wine – Like all luxury goods, fine wine is produced in finite quantities in specific regions, which prevents supply from fluctuating significantly from year to year.
- Growing Demand in Emerging Markets – Burgeoning wealth in emerging markets, especially in Asia, has driven the market for fine wine higher and will continue to do so in the coming years.
- Weakening British Pound – With sterling sinking in light of the Brexit decision, fine wine, which is priced in pounds, has become more affordable than ever for foreign buyers.
“With global equities markets potentially facing the end of a record bull market, it is important to highlight fine wine’s ability to help investors avoid downside risk,” said Tom Gearing, Managing Director of Cult Wines Ltd. “Our report shows how fine wine can act as a defensive asset class in times of economic crisis but also benefit from periods of economic growth.”
While fine wine has long boasted a reputation as a defensive asset, Cult Wines’ analysis has demonstrated that the extent to which wine can retain its diversification benefits even amid broader economic deterioration. This analysis shows that fine wine remains a viable alternative asset class because of its distinct defensive qualities.
Fine wine’s investment profile is governed by a unique set of market fundamentals and risk factors. Cult Wines believes rising global wealth, a weakened British pound and a continued interest in fine wine in China and other non-traditional wine markets will continue to strengthen growing demand for wines with strictly limited supply.
“We’re optimistic about the future growth of the fine wine investment market,” Gearing added. “With the right expertise, investors will have the significant opportunities to bolster their portfolios with a stable, defensive asset class.”
About Cult Wines Ltd
With more than 1,500 private clients and assets under management totaling $100 million, Cult Wines Ltd is one of the world’s leading wine investment companies. Founded in London in 2007, Cult Wines combines market-leading fine wine expertise with a hard-nosed asset management approach.
A family-run company, Cult Wines tailors each investor’s portfolio to their specific risk appetite, investment level and target returns. The firm’s rigorous due diligence and investor protection measures help to ensure that only the highest-quality assets are included its investors’ portfolios. Further information is available at www.wineinvestment.com.