News

Investors driven towards physical assets as markets go volatile

23rd August 2016


Alternative investments are back in fashion. High-net worth investors are turning to Ferraris, rare diamonds and Burgundy wine as they grapple with ultra-low interest rates and the volatile stock market.  

And if this is not good news enough, a recent survey carried out by the British wine industry showed that one in four wealth managers said they expected appetite for fine wine investment to increase over the next 12 months due to the impact of Brexit.

Wine investment as a diversifier

Nearly half of intermediaries in the survey said the main reason for the anticipated increase in interest was because fine wine represents the perfect diversifier to mainstream assets such as equities and bonds, providing a safe haven for experienced investors.

Elissa Bayer, Senior Investment Director at Investec Wealth & Investment told The Yorkshire Post: “The recent fall in interest rates and the buy-to-let tax changes have prompted many investors to re-evaluate their portfolios. “It is not surprising that collectable real assets such as fine wine and classic cars are becoming more popular among some wealthier investors seeking diversification.”

Another spokesperson for the wine industry said – “Not only can the sector provide strong returns under expert guidance but it is an enjoyable, collectible, tangible asset that has a very exciting future.

“An allocation towards fine wine provides investors with a number of guarding characteristics, and has the advantage of not necessarily following the general trend of lagging behind the rest of the market during economic expansion because demand is consistently strong. Real assets remain an attractive option as they tend to change in value independently of the core financial markets.”

Fine wine over stocks & shares

After a 30-year bond bull run and bouts of money printing that have pushed stock values out of kilter with economic reality, high-profile investors are turning back to physical assets. Even Pimco boss Bill Gross said last week that he favoured land and gold over more traditional investment types.

The latest Knight Frank Luxury Investment Index (KFLII) clearly depicts rare coins, jewellery and classic cars among the top performers along with fine wine.

The wine market has been on an upward hike since January, seeing its largest positive monthly movement since 2010 in July. The Liv-ex Fine Wine Investables index, which tracks around 200 Bordeaux red wines, is up 13.8% so far this year, compared with 6.9% for the S&P 500 and 8.9% for the FTSE 100.

Fine and rare wines at Capital Vintners 

We at Capital Vintners can confirm the increased level of sales over the past month from overseas as well as domestic buyers. Confidence in the market is clearly increasing and market volatility is working in our favour. For expert advice on how to compile a successful portfolio, get in touch with one of our sales representatives.

 

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