Fine Wine Is a First Class Investment

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Wine lovers are getting a taste for finance by putting their money where their mouth is and investing in their passion for Bordeaux Grand Cru.

Often the market for wines is the last to feel economic upheaval and the first to show recovery. Since the economic meltdown we've started to see wine feature more prominently in investment portfolios.

According to figures released by the fine wine index 'Liv-ex', a 1982 bottle of Lafite Rothschild was the best performing asset of the last decade; with the value of a 12 bottle case increasing by a staggering 857% in the past 10 years from £2613 to £25000.

Wine lovers are getting a taste for finance by putting their money where their mouth is and investing in their passion for Bordeaux Grand Cru.

With wine experts hailing the 2009 vintage as the finest in 32 years it's a compelling story which is no longer viewed as a niche option but as a credible alternative to traditional cash investments and property.

Dominic Baldwin, head of wealth management firm Xentum, said "Often the market for wines is the last to feel economic upheaval and the first to show recovery. Since the economic meltdown we've started to see wine feature more prominently in investment portfolios.

In reality it has been a strong player for the past 20 years showing consistent returns and out performing the FTSE 100. Typically, gold has held much fascination for creative investors but wine has in fact out performed it since reliable records began in 1993, with fine wine prices rising more then ten fold compared to gold which has doubled in price over the same period."

In fact, wine is now being taken so seriously as an alternative investment with Swiss economists Philippe Masset and Jean Philippe Weisskopf recommend earmarking 20% of an overall investment portfolio to wine as it will increase returns and reduce risk.

So, why is fine wine proving to be such a success story?

Its economic outlook is attractive as essentially demand outstrips supply. Supply is static as the chateaux cannot expand their vineyards as land is scarce, yields at harvest are kept low to ensure quality, weather impacts on production and every bottle opened is a bottle lost to bidders - it cannot be replenished.

Emerging wine markets in Asia strengthen the case further. Since the demise of wine duties in early 2008 Hong Kong has the second largest market behind New York selling £41 million worth of wine last year alone in just 14 auctions.

For the future, India will be the one to watch. Despite the country's vast population of over 1.1 billion wine consumptiion is still low. The Indian Wine Industry forecasts that wine consumption in India is expected to grow as much as 30% annually from now until 2012.

For investors looking to sample fine wines as an option there are many managed cellar plans and wine funds to choose from.

Baldwin adds "A word of caution. Investors should be vigilant about the associated fees. Fees can be as high as 40% for some managed cellar plans and other wine funds incur separate fees such as introductory, set up and management charges which soon rack up."

One of the best schemes on the market is run by The 1855 Club as it is the only Enterprise Investment Scheme (EIS) which you can invest in wine while giving wine lovers the chance to have a shareholding in a company that trades in Bordeaux Grand Cru classes. Investors get the opportunity to visit and stay in chateaux and attend dinners and tastings with wine makers as well as receive an attractive return on their investment.

Nick Stephens of Interest in Wine said "This kind of investment gives wine lovers the chance to induldge in their favourite hobby while getting involved in a unique investment. It also offers qualifying UK tax payers a tax efficient opportunity which is always an attractive option in the current climate."

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Lisa Codling
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