Justin Knock, Oenofuture’s Master of Wine, explains how wine investment can offer a safe and profitable alternative to the overheated US stock market
Investors have enjoyed a remarkably successful 12 months since the depths of the pandemic bear-market and are now wondering where markets can go from here. Rising yields on US treasuries, thanks to improving consumer and business sentiment, has elevated inflation expectations throwing shade on growth stocks and cast a light on the very high valuations of US stocks overall.
Yet with unprecedented amounts of monetary expansion and plans for enormous US fiscal spending, there are extremely strong arguments for both bullish and bearish scenarios ahead. One safe haven that’s attracting a lot of attention is the fine wine market, a highly sought-after alternative asset that offers steady annual returns of 10 to 15 per cent and very low correlation to the stock market. It can be an excellent area in which to invest profits from shares that may have become fully valued.
Fine wine’s performance compared with stocks is certainly compelling. If you had invested $100 in the fine wine market in 1952, your investment would now be worth $420,000. On the other hand, $100 invested in the stock market would now be worth a modest $100,000. Typical holds in the fine wine market range tend to be long-term, usually between five to ten years, but even over a shorter time-frame healthy returns can be made. For example, wines from Domaine de la Romanée-Conti, arguably the world’s most prestigious winery, regularly show rises in valuation of 150 to 200 per cent over a five-year period.
Unlike almost any other type of investment, fine wine also has the unique advantage of being a tangible asset that’s made to be drunk and enjoyed. Most of the world’s top producers create tiny quantities of their best wines every year, and over time the number of bottles from a given vintage dwindles as they are consumed. This means pricing is mostly determined by a very simple economic model – supply and demand. And after a tumultuous pandemic year, the demand for fine and luxury wine has never been higher both in established markets such as the US and Europe and younger wine-consuming markets such as China and Brazil.
Traditional wine investment, almost exclusively in producers from France, has been a little like the infamous Hotel California: check in any time you like, but leaving can be difficult. Finding reliable and timely exit strategies can be challenging. OenoFuture is unique among wine investment companies in being able to offer both multiple and diversified exit strategies and timing advice.
As well as selling your wines on to other collectors and drinkers, we supply wines to many of Europe’s top hotels, bars and Michelin-starred restaurants through our OenoTrade arm. Later this year we’re opening our first luxury wine shop and bar, OenoHouse, in the City of London, which provides yet another exit strategy for our investors. In both cases, end-clients appreciate access to mature wines that are ready to enjoy, but without having to pay the holding costs.
Investing in wine can seem daunting at first, which is why it’s a good idea to seek expert advice. Here at OenoFuture we offer a free, no-obligation consultation call to all potential investors where we discuss your financial goals and help you select the right wines to match your desired investment risk profile, term and budget.
For some investors this might be a portfolio of blue-chip wines from iconic Bordeaux estates such as Chateau Margaux, Chateau Latour or Chateau Mouton Rothschild, or top Napa estates such as Screaming Eagle and Opus One. These tend to be longer-term holds, appreciating over a five-to-ten-year window, which makes them ideal for building up a nest egg for your retirement or putting your kids or grandkids through college.
Other investors may prefer to go for more wallet-friendly wines which can be sold on through our hospitality partners, generating a guaranteed return inside a shorter term, typically 12 to 18 months. This process can then be repeated, providing a steady stream of very low-risk returns which can be reinvested as many times as you like, much like a dividend reinvestment model attractive to income-focused investors.
So what’s the catch? Very little. Since it’s asset-backed and demand-driven, fine wine is a very safe and secure investment. Once you invest in the market, your wines are kept in optimum conditions in a secure bonded warehouse in your name. They are fully insured, and we have a dedicated anti-fraud department within OenoFuture who ensure the authenticity of your bottles. In almost all cases we purchase direct from the producer to ensure impeccable provenance.
Unlike other wine investment services, OenoFuture also doesn’t charge any management fees. We always put our investors first, and this extends to our profit-share model. We take a modest commission on the profit you make when your wines are sold out. This ensures that we only make money when you make money, and we’re constantly striving to offer the best possible service to each and every one of our investors. That’s why we’re seeing record numbers of first-time and seasoned investors turning to us to protect their assets.
To find out how you could profit from investing in wine and to request your free no-obligation consultation call, visit oenogroup.com.
by Justin Knock MW, Director of Wine, OenoFuture
Image provided by OenoFuture