The number one rule of investing is not to lose money—”buy high, sell low” is rarely the path to financial success. That, according to one investment strategist, is what makes the fine wine market an ideal safe space for investors seeking stability for their portfolios.
“Historical studies have proven that fine wine is always going to appreciate in value over and above the rate of inflation,” says Tom Gearing, managing director of Cult Wines Asset Management, one of the world’s leading wine investment companies. “Beyond its intrinsic value as a passion asset, fine wine can have a stabilizing effect on investors’ portfolios because its performance isn’t correlated with volatile equities.”
Gearing, a runner-up on the UK edition of The Apprentice in 2012, predicts the global market for fine wine is set to soar as expanding wealth in Asia-Pacific drives increasing demand for an asset with limited supply.
“Southeast Asia and, obviously, China are two of the regions which at the moment are continuing on a steep upward curve in terms of wine education and consumption. And this is not a short-term track. It’s definitely going to continue for a long time,” says Gearing.
Growth in less obvious emerging markets is also fueling the surge in wine investment. Gearing recounted a recent conversation he had with Jean-Guillaume Prats in which the CEO of the legendary Bordeaux producer Château Lafite Rothschild was downright giddy over the prospects in markets such as Mexico and Nigeria, where there’s increasing tremendous interest in luxury spirits as well as fine wines.
And don’t forget about the good ole U.S. of A. With California wines beginning to take their place alongside the best old-world vintages, the opportunity for American investors has never been greater, according to Gearing. For nearly five years, Cult Wines Asset Management’s U.S. index—which represents 10 percent of the company’s overall exposure—has performed in the top three sub-regions of the company’s holdings alongside Burgundy and Bordeaux. Gearing pegs the return on the U.S. index at 62 percent spanning the time frame from November 2013 to May 31, 2018.
At the moment, most of the investor focus in the States is on the more established wineries and brands—the classic Cabernet Sauvignons of Napa—that have a little bit more international market recognition and liquidity. Some of the emerging regions that are producing great wine, Oregon and Washington state for example, from a pure investment play haven’t performed in quite the same way as Northern California . . . yet.
“Screaming Eagle, Opus One, Dominus, and wines of this nature are already very well positioned in the wine collectors’ market,” says Gearing. “But keep an eye on the hot wines from other U.S. regions because they will get there sooner rather than later.”
Gearing cautions that there’s no guarantee that the global demand for fine wine will double in, say, the next year. It may take five years—maybe more. “No one can say for sure exactly when it will happen, but it will happen,” says Gearing. “And that’s what’s so exciting about fine wine from a bettor’s perspective.”