Product review: Raise a glass to new wine EIS

Fine wine can be bought for pure pleasure, but it can also present investment opportunities, something that Ingenious Asset Management wants to harness.

The Ingenious Vindemia 2 EIS fund is structured as an enterprise investment scheme (EIS), meaning that investors can benefit from 30% income tax relief on investments up to £500,000.

It will invest in EIS qualifying companies, focusing on mature fine wines from noteworthy producers and regions.

Launched on 11 January 2012, the fund is the successor to the first Vindemia EIS fund, which closed for new investment in July 2011.

The principal wine trader for the fund will be Peter Lunzer, founder of Lunzer Wine Investments, and an active trading approach will be used to seek returns.

Ingenious is looking to raise £10m for the fund and is targeting an average annual return of 22.7% after tax breaks, which Lunzer described as “a conservative estimation” of what could potentially be delivered.

The fund will have a core focus on capital preservation but also target capital growth.

The minimum investment for the Vindemia 2 fund is £10,000 and it will close to investment on 2 April 2012.

There is a 6.5% investment and advisory fee, 1.5% annual monitoring fee, annual custodian fee of up to 0.275% of the total fund and a performance fee of up to 30% of distributions in excess of £1.05 per each £1 invested.

www.ingeniousmedia.co.uk

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Small scale wine investment can start with a few bottles in the cellar, but any long term gain depends on avoiding the temptation to try a taste.

Investing in a fund instead puts the product in someone else’s hands but keeps the potential for returns.

Ingenious says restricted supply creates growth potential for wine, due to the nature of wine production and maturing time, in addition to growing global demand.

The upside of the Vindemia 2’s structure as an EIS is that investors can make a greater real return due to the income tax relief.

However, this does limit the companies that Ingenious can target for investment.

EISs are designed to help smaller, higher risk companies gain access to capital. The payoff for this is the tax break, but it also means that investors will generally find the investment more volatile.

An annualised average return of 22.7% is ambitious, but Ingenious is wise to bring a wine buff on board who knows the market rather than blindly chase returns itself.

aimee.steen@ft.com