The Best Performing Luxury Investment
According to the Knight Frank Luxury Investment Index, fine wine has topped the list of luxury investments with its stellar growth over the last 12 months, posting gains of 25%!
Here's what Andrew Shirley, The Wealth report editor at Knight Frank, had to say:
"Wine, driven by strong growth in the key Bordeaux, Burgundy and Northern Italian investment-grade markets, has now claimed top spot with the year-on-year value of the Knight Frank Fine Wine Icons Index shooting up 25%."
Much like every market, the price for fine wine does go up and down and as with other investments, timing is key! The leading benchmark for fine wine, the Liv-ex 100 (www.liv-ex.com) reflects the price movement of the top 100 investment grade wines.
The index peaked in 2011 at 365 points (it's all time high) after a bull run from an index value of just over 200 points in early 2009 (not bad!).
One of the causes to this dramatic value increase was the "new to the market" Chinese buyer, whose main interests were driven by price, brand and exclusivity (the Veblen Effect). Speculation that these buyers would continue to pay crazy prices for wines added to the bubble.
We then saw a major crackdown on corruption in China by Xi Jinping which put a halt to some of the "corporate gift giving" that was supporting the highest end of the market. The market decided that the lofty prices were not sustainable and fine wine experienced a 3 year bear market with the Liv-ex 100 falling 35% to 234 points in June 2014.
At this point, it was largely considered that the market was oversold and (it was great time to buy!) in the coming months, buyers came back to the market.
The Bordeaux Wine Council (CIVB) reported exports to China increasing by 31% in volume and 25% in value in 2015 compared to that of the previous year. These increases in demand did the job of clearing up the relatively large quantities of stock that were available in the market following the price drops and several unsuccessful En Primeur campaigns.
In late 2015 the Liv-ex 100 began its recovery. The index has now risen in all but one month since December 2015 and now sits at 308.67 points (31/08/2017), 32% off the 2014 low and some 18% off its previous highs.
According to Knight Frank, wealthy individuals from all around the globe (including a maturing Asian market) are keen on buying and holding a fine wine collection. It is this widespread demand that has has resulted in the Liv-ex investables index having a 25 year compound annual growth rate of 11% and wine being in the top two performers in all categories of holding period in the Knight Frank Luxury Investment index a shown in the table above.
At Veblen Wines, we firmly believe that those wishing to invest in the market now and add to their collection, may be rewarded with similarly impressive returns in the years to come.
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