Is Fine Wine an Investment Haven After Brexit?
Britain collectively voted to exit from the European Union causing major upheaval in the venture capital world. Investors experiencing the economic turbulence after Brexit are understandably nervous. The upshot of this momentous event has left several severely startled financiers concerned about the rapidly falling pound – and looking around for secure investment options.
Investing in fine wine has just become an
even safer investment haven
Even though global markets are rattled, there are still steady, reliable options available to investors – vintage options, like fine wine investment. One of the main traits of a vintage investment is that it has several defensive characteristics that make it perform well, even in a declining economy. This is why:
Pricing – Since the pound has dropped to the lowest it has been in over three decades, fine wine prices have become more competitive. Because of this overseas demand is stimulated. Even though fine Bordeaux investment wines may be priced in Sterling, most of the buyers are transacting from overseas countries like Japan, China and the United States.
Fine wine investment remains on an upward trajectory – Despite the fine wine market suffering a substantial price correction after a period of falling prices between 2011 and 2014, annual returns and price increases remain consistent, unlike many other investment markets and economies.
Fine wine is independent – While many other asset prices are dependent on other pricing, holdings in fine wine has no correlation to the FTSE100. Again, performance is consistent.
Lack of white noise – Lucrative investments can be drowned out by the white noise of a strong economy. During an economic decline, solid investment options become more obvious and fine wine investments are no different.
Physical assets perform better in a weak economy – This is especially true when it comes to the excellent long-term performance track record of fine wine investments.
Sin Industries – Although fine wine cannot truly be considered as sinful, it is regarded as part of the so-called ‘sin industries’ – and during economic downturns these industries do better.
The Flip-Side of the Coin
Of course there is apprehension when it comes to making investments during tumultuous times. According to Mike Laing, Armit Wines managing director, many customers would prefer taking the risk of waiting to see how things settle down post-Brexit before committing funds. Gary Boom of BI is equally wary and was heard voicing concern over volatility when it comes to trade markets.
Is it Really That Risky?
Veteran investors agree that making time-honoured investments is the way to go – and what better than investing in en primeur wines? Acquiring stock at the lowest market price, especially when the economy is dipping, makes perfect sense. According to the Wine and Spirit Trade Association (WASTA) wine trade in the UK has more than doubled in the past 10 years and the country has become an importing and distribution hub for fine wines across the globe. Being the preferred point of entry into the EU’s single market, Britain is the ‘beating heart’ of the global wine trade, making fine wine investments in the UK a very sensible decision. Any investment has associated risks. It is up to the individual investor to decide what level of risk they are prepared to take, and what they are prepared to invest.