As the forecast remains bleak for global financial markets, savvy investors are developing an insatiable appetite for fine wine. However, rather than popping open priceless vintage bottles to calm their nerves, global investors are turning serious profits from the enduring strength of the fine wine market.
One key measure of this success is the Liv-ex, the global trading platform for fine wine. Over the past 15 years, fine wine has consistently outperformed conventional equities with the Liv-ex 100 and Liv-ex 1000 indices rising by 213.9% and 258.2%, respectively. In comparison, UK equities have lagged at a mere 59.2% growth over the same period.
This impressive track record for growth is complemented by fine wine’s low correlation to financial market volatility. Going back to the turbulent beginnings of 2008 and 2009 where global stock exchanges plunged, fine wine soared. The average five-year forward performance of the Liv-ex 1000 since 2004 is approximately 74%, whilst over the same period equities returned 34%.
In these uncertain times, fine wine can offer an enticing and reliable safe haven for those looking to diversify their portfolio. However, without knowledge or expertise in fine wine, yielding lucrative returns will not be easy.
This is where companies like the London-based OenoFuture come into play. Founded by Italian wine expert Daniel Carnio, OenoFuture is a fine wine investment firm helping clients enter the market by personally selecting and recommending fine wines with high investment potential based on its extensive research and insider knowledge. The company facilitates the purchase of its client’s chosen wines, provides regular market updates, and advises on the ideal moment to sell maximising profit.
The European caught up with OenoFuture founder Daniel Carnio to learn more about entering the fine wine market.
What are the key drivers of the fine wine market and how do they compare to other collectables?
Daniel Carnio: Like other luxury assets, such as jewellery or art, the key drivers of fine wine prices are scarcity, demand and supply. However, the unique feature of fine wines is that they are made to be consumed. Every time someone drinks a bottle of Domaine de la Romanée-Conti that particular wine becomes even rarer and thus more valuable. Allied with this is the growing passion for fine wine in markets like China, where the number of people spending $250 and over on wine has jumped by 75%. Thanks to limited supply, growing demand and the rarity factor, investment indices like Liv-ex show that top wines are consistently generating profits of 12%.
How do you decide which wines are actually ripe for investment?
DC: Our approach differs from that of many other fine wine investment companies, since we firmly believe in embracing the world’s lesser-known fine wine regions. Bordeaux’s market share now accounts for around 60% as investors have increasingly turned to Burgundy, Champagne and countries like Italy and Spain. We work closely with estates like Artadi in Rioja, Bibi Graetz in Tuscany, and Gagliardo in Barolo, which allows us to acquire high potential wines at excellent prices for our clients. OenoFuture’s average return of 11.93% across the last year demonstrates the soundness of our alternative approach.
Do you see this shift away from traditional fine wine regions continuing into the future?
DC: Absolutely. One of the most exciting developments of the past year was the addition of the California 50 index to the Liv-ex. The index tracks the performance of the last 10 vintages of the exceptional Dominus, Opus One, Screaming Eagle, Harlan Estate and Ridge Monte Bello wines. It is the equivalent in the fine wine world of declaring open season on these wines and demonstrates how powerful these alternative wine regions are becoming for investors.
What key trend do you expect to see for the fine wine market in 2019?
DC: I think one possibility is the contraction of the Burgundy market. In some ways, it looks like history is repeating itself with the mind-blowing prices fetched by a few top Burgundy estates like Domaine de la Romanée-Conti. As happened with Bordeaux a decade ago, it is possible that this top-heavy growth will come back to bite and prices may crash back down to earth. The upside of this bubble is that there are real bargains available from those less-fashionable Burgundian estates.
Where did your passion for wine come from and how is OenoFuture different from other wine investment firms?
DC: I grew up on my family’s vineyard in Italy so wine has always been a big part of my life. I knew
that wine was my lifelong passion so I chose to build a career in fine wine and learn everything I could about the industry. OenoFuture is the fruit of my love of wine and our real strength is our insider knowledge of alternative wine regions, such as Italy, Spain and the New World. I’m incredibly lucky to work with a passionate and talented team who love what they do and are always striving to deliver the best results for our clients. ν
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