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Home > Investments > Alternative Investments

By Laura Hughes is a freelance journalist | Published Jan 25, 2010

Highlight: Investing in wine

For them, wine selection has been based on choosing a crate or two of something they enjoy drinking rather than being preoccupied with chasing profit.

However, there are a growing number of wealthy individuals who invest in wine, either privately or through a wine investment fund, with the main aim of making a good return. Whether that is through the so-called 'blue chips' of Bordeaux and Burgundy, or with riskier Rhônes and Californian cabernets, for the most part this wine will never be tasted by the investor.

In all, it is estimated private collectors in the UK hold more than £1.2bn worth of fine wine in bonded warehouses. While the sector has undoubtedly been hindered by the recession, there is evidence to suggest a general recovery, with some vintages that had been available at sharp discounts now returning to their pre-recession prices.

This trend is demonstrated in the upward trajectory of the London International Vintners Exchange 100 Fine Wine index (Liv-ex 100) over recent months. The index, which was created in 1999, tracks the price movement of 100 of the most sought-after fine wines for which there is a strong secondary market. Most of the index is made up of Bordeaux wines, although wines from Burgundy, the Rhône, Champagne and Italy also feature.

The index stood at 237.17 as of December 31, a rise of 0.9 per cent on the previous month’s figure. Overall, the index was up by 15.7 per cent for the year. This followed a tough final quarter in 2008 which saw the value of the index fall by 20 per cent.

The fine wine market ended 2009 in positive fashion, according to James Miles, director of Liv-ex.

"Trading continues to be strong, with activity spread across a wide range of wines and vintages."

However, wine should only be considered as a serious investment for those who are in it for the long term. While some of the so-called investment wines experience a great deal of volatility as they fall in and out of favour, most other vintages slowly gain value as they mature, which can take more than 20 years.

Laura Hughes is a freelance journalist

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