Investments  

Dipping into wine investing

To take advantage of the asset class there is the option of direct investing, including through a managed portfolio of a basket of wines, or through specialist investment funds.

Mr Smith says: “It remains possible to invest in wine by owning cases directly, but this usually involves suffering the margins (on both the buy and sell sides) charged by merchants, and makes diversification – and hence risk management – more difficult.

“Instead, investors – whether they are connoisseurs or simply like the risk/return profile of wine – are increasingly looking at funds, which are more likely to be incentivised to buy and sell at the best possible prices. Funds can also pool money across investors to provide diversification, and use their professional expertise to select the wines with the best prospects of future growth. While there are fees involved with funds, these are transparent and can often work out less than the more hidden transaction costs associated with direct investment.”

Mr Brierley agrees investing through a fund offers the benefits of being part of a larger group and so reduces personal exposure, but there are concerns about what market it is being sold into when the fund has to meet redemptions.

“The benefits of having one’s own managed portfolio could be that you own the underlying assets, and you have a bit more control.”

However he admits storage is a key issue, which has a “small cost associated with that it’s probably about £1 a bottle per year at the moment, so about £12 a case per year, and that excludes insurance”.

“The other costs that have to be considered are duty and VAT. Ideally one should not pay those costs if one is investing in wine for the medium term. These days that’s 20 per cent of the value so if you paid that you would have to wait for the market to move significantly to get it back.

“Wine investing is one of those things that people consider to be very easy, and it can be – no question. But the best results come from getting advice and talking candidly with someone who is in the market on a daily basis.”

Nyree Stewart is deputy features editor at Investment Adviser