Investing in Wine Might Pay Dividends Now
Had this report appeared six months ago, it would have provided some very sober reading for wine investors. Not least because the end of 2008 coincided with the first significant correction in the fine wine market for more than a decade. Now investing in wine looks like it might pay dividends
During the first half of 2008, Liv-ex, an index of the top 100 investable wines, climbed by a steady and impressive 9.5 per cent before stalling during the summer. In the final quarter of 2008 it fell by nearly 25 per cent; in October it lost more than 12 per cent of its value - the biggest monthly movement since its inception in 2001.
There are no prizes for guessing why. Despite the fact that the fine wine market had seemed impressively impervious to the hurricane blowing through the financial markets for most of last year, it clearly could not remain immune indefinitely. The collapse of Lehman Brothers was the turning point, as many private and institutional investors desperately sought to avoid losses in the ensuing dash for cash.
They were not the only ones looking to liquidate their wine holdings: merchants had seen the writing on the wall and had already begun to empty their inventories. Distressed sellers and restaurants also started offloading, while a number of wine funds found themselves on the receiving end of growing numbers of redemptions.
Never before had such a flood of investment-grade wine appeared on the market simultaneously. At one stage, it seemed to almost grind to a halt as prices tumbled.
The wines that lost the most value were, of course, those clarets that had gained the most in the bull run of the previous two years. Initially, that meant the top 2005s, which had surged in price and were in plentiful supply. Some prices fell by up to 50 per cent.
However, as things got worse, it was not just the 2005s that started to feel the pressure. Older vintages such as the 2003s and 2000s were also sucked in, as forced sellers continued to dump stock.
The contagion also spread to rarer and more mature vintages, pulling down prices of 1996s and the 1990s in their wake.
