Demand for fine wine soars, outstripping other investment assets

Demand for fine wine is outstripping other investment assets — including watches, luxury handbags, and art — new research by WineCap shows, with investors buying into the category as an “inflation hedge”, Cru World Wine told db.

New research from fine wine investment platform WineCap has revealed fine wine’s growing prevalence among high net worth client portfolios.

The report, Fine Wine: The Journey from Passion Asset to Mainstream Asset Class, was conducted among 50 UK-based wealth managers and financial advisers who only deal with high-net worth clients in the range of £100,000 or more.

It placed fine wine ahead of other ‘passion’ assets, including classic cars, luxury handbags, watches and art, with 96% of wealth managers expecting demand to increase. Three out of five of these said that it will increase “significantly”.

According to the study, UK wealth managers and advisers estimated that over 40% of their high net worth client base invest in fine wine with an average portfolio allocation of around 10%.

So where is this investment coming from?

Jeremy Howard, CEO of wholesaler and importer Cru World Wine, told the drinks business this morning that he believes a “number of factors” are at play in driving the boom in current fine wine investment.

An older generation of investors “instinctively understand, and academic research backs it up, that owning fixed supply, physical, assets is a good way to protect wealth from rising inflation. And assets don’t get much more ‘fixed supply’ than fine wine and spirits,” he says.

Cru World Wine is seeing a pickup in higher net worth clients looking to fine wine, as well as premium spirits, “specifically as an inflation hedge” — a trend which has burgeoned over the last few years.

According to WineCap’s report, 72% of wealth managers and financial advisers expect demand for rare whisky to increase over the next year.

But there is also a new generation of investors engaging in fine wine. Howard believes the younger cohort “love the ‘DIY’ approach to owning their own assets”, and remain sceptical of traditional fund structures.

“This ‘Wall Street Bets’ generation is slowly finding their way into fine wine and spirits,” he says, but with a much more “proactive stance”.

“Rather than buying a few cases and putting them away for a decade, this younger segment is actively bidding and offering each day, looking to trade in and out and many profits that way. As spreads on fine wine trading narrow, this is becoming more and more of a viable strategy,” Howard told db.