Wine Futures: Is Investing Right for You?

An expert explains the challenges, the rewards, and what you should know before dedicating part of your portfolio to the age-old en premeur system.

Wine Futures 101 Photo: Courtesy Cult Wines

Each spring, a flurry of wine critics, investors, experts, and buyers descend on Bordeaux for its annual barrel tasting of the previous vintage, to get the first taste and to sort out pricing, offers, and investment advice for the year’s en primeur—or wine futures—sales. If you don’t already shorten the frenetic event to “EP,” you likely aren’t an investor who’s already comfortable committing to an early price established for wine in barrel, months or years before it will be bottled, with the expectation that its value will increase substantially over time. And yet, the return on wine futures can be substantial and the process of investing riveting. We put a few questions to Tom Gearing, managing director of Cult Wines Asset Management, to find out what’s important to know before getting started and why you need a pro on the ground at that barrel tasting, weighing the year’s value against long-term performance—for every brand.

Are wine futures right for someone who hasn’t followed prices of the world’s great wines?

Tom Gearing: From an investment perspective, wine futures can be one of the most rewarding strategies in the fine wine market. Collectors have the opportunity to buy the best wines at market-release prices. Futures have proven to be one of the most successful strategies for wine investors, where typically one tends to see the most price action over the short to medium term. A basket of typical physical Bordeaux stocks may range between eight to 12 percent per year, while a similar en primeur selection might show five to 20 percent. In our case, if a client had purchased one case of each of our recommendations, the average annualized growth is 15.3 percent, with a range of 11.1 percent to 18.5 percent.

How sound an investment are wine futures at the moment?

We are coming to the end of the 2017 Bordeaux futures campaign, and, yet again, EP has proved its efficiency for certain estates that stuck to a sensible pricing strategy.

It sounds vital to have someone on the ground who knows the estates and can spot the sensible pricing strategies.

Investing in wine futures sounds simple, but an understanding of vintage quality, aging potential, future performance, pricing, and critical opinion are required to optimize returns. Identifying the “winners” from the “losers” requires intimate market knowledge. For a newcomer to the wine investment market, it’s critical to work with a company that can demonstrate a track record of performance, excellent routes to market to buy and sell the wines, as well as financial stability.

Are there any good resources for that search?

There’s a wealth of information about wine investment on platforms like Liv-ex and Wine-Searcher, and, of course, our website: wineinvestment.com.

What key questions should prospective investors ask themselves before wading in?

Do you have a clear understanding of how the wine futures system works? Do you recognize the risks? Are you working with a reputable merchant or investment house that can provide you with a track record of their futures performance?

Should an investor’s particular wine interests play into his or her choice, or is that dangerous?

While we don’t want to take the passion out of this asset class, we do encourage clients to set their drinking preferences aside. That said, occasionally there is some overlap when a client says, “I really like a certain producer or region,” and that aligns with our investment criteria.

What do you find especially exciting about wine futures?

Before we recommend the wines to our clients, we get the chance to taste them. And there’s no greater satisfaction than discovering an up-and-coming estate that way and executing a successful investment strategy. Some of our most successful futures positions have been the result of our tasting team discovering hidden gems!

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