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The Capital Vintners Guide to Fine Wine Investment – Part 3

23rd November 2015


The Wines – What to include in your portfolio

In the final part of our guide for the aspiring wine collector, we get to the heart of the matter – the wines themselves.

Having discussed the market and the basics of fine wine as an investment strategy, we look at the performance of each of the world’s top wine producing regions along with some recent releases from each vintage, to give you a sense of what constitutes a great portfolio.

A changing picture for fine wine trade

It’s an exciting time to begin collecting wine. What used to be a market almost entirely dominated by a single product is now enjoying ever more input from other producers, adding variety and quantity to cellars worldwide.

Just five years ago, Bordeaux wine accounted for 95.7% of all fine wine trade. At present the figure is 74.2%, with Champagne, Italy and the Rest of the World gaining ground at 6.1%, 6.9% and 4.6% respectively.

Bordeaux wines – the top dogs of alternative investments

The Chinese bubble that sent collectors mad over specific Bordeaux vintages has burst, and investors are finally broadening their interests. However, Bordeaux will always be the most sought after investment grade wine, and is therefore the first region to consider.

The success of Bordeaux can be narrowed down to just eight vintages, the Premier Cru or First Growths – Châteaux Lafite Rothschild, Latour, Margaux, Mouton Rothschild and Haut Brion – and Pétrus, Cheval Blanc and Ausone of the Right Bank.

Currently, the best value to be had is in the back vintages of 1982, 89, 95 and 2005. In terms of demand, 2010 was the most traded vintage in November, accounting for 20.3% of all Bordeaux trade. In October, Lynch Bages saw high levels of activity as the third most traded wine by value, overtaking three of the Five First Growths.

The best Burgundy vintages – low supply, high demand

Burgundy wine is typically produced in low quantities, meaning short supply and high demand – the classic combination for a healthy investment.

While prices for Bordeaux First Growths have been falling since 2011, Burgundy’s top wine has been going up in value. The Liv-ex Burgundy 150 index, which tracks the price of the ten most recently physical vintages for 15 white and red Burgundy labels, was October’s best performing sub index, up by 2.3%.

The brands to consider here are Domaine de la Romanée-Conti (DRC), Leflaive, Leroy, Liger-Beliar, Mugnier, Rousseau and Roumier. The Liv-ex DRC Index has seen a 53.2% increase in the last five years, and recent auctions show evidence of a high demand for Burgundy wines among Chinese investors.

Fine champagne – a sparkling prospect

Champagne is typically produced in large quantities, causing prices to plateau on entering the market. As years go by the wine is drunk, pushing down supply and raising demand.

Registering a record high in September, trade in Champagne has recently dropped after two months above 10%. In all, the region has taken 6.1% of the trade so far in 2015 – a big improvement on last year.

The region’s fizzy performance is due to a few exceptional recent releases – Dom Perignon 2006, Pol Roger 2004 and Cristal 2007. Back in July, Antonio Galloni called the Cristal vintage “one of the very finest releases of the year”, awarding it 97+. With its high score and comparatively cheap price, this may be one for the first portfolio.

The two other major houses Taittinger and Salon also represent sparkling opportunities for those willing to wait 5-10 years.

Fine Italian wine – the rise of the Super Tuscans

Outperforming Champagne and even Burgundy over the last couple of months, Italian wine is benefitting from a real surge in demand, taking 8.1% of all trade by value in October and becoming the second most highly traded region after Bordeaux.

Again, a couple of recent vintages may be the culprits. The price of Tignanello 2011 was up 13% while the 2009 accounted for 4.2% of Italy’s trade share. Another Super Tuscan, Sassicaia, has seen high levels of activity over the last few months with its 2011 vintage, while the Massetto 2010 occupied top spot with 17.8% of all Italian trade.

These recent vintages have the advantage of being highly scored, abundant in stock and relatively low in price, making them particularly attractive to the novice investor.

The Rhône – silently superior vintage wines

France’s Rhône valley estates, such as Guigal’s single vineyard Côte Rôties known as the “La Las”, feature comparatively less on the global market despite consistently producing vintages of resounding quality.

Chateauneuf du Pape is the Southern Rhône’s most celebrated appellation and the Clos Des Papes estate produces one of the region’s most revered reds. It is famous for its complexity, arising from the variety of soils and altitudes present across the 25 individual parcels of land that are home to its vines.

In 2014, Liv-ex suggested that the reason the Rhône’s best vintages see such little demand is that each vintage produced is an excellent as the next. The region’s wines are awarded top marks time and again by renowned critics, and represent an attractive option for the oenophile investor.

Rest of World wines – Californication

Perhaps the most exciting aspect of wine investment in the 21st century is the emergence of international wines of unprecedented quality. The Rest of the World (ROW) 50, a sub-index of the Liv-ex 1000, tracks the prices of ten most recent physical vintages for the five most traded wines of these regions – Dominius and Opus One from California, Vega Sicilia from Spain, Taylor from Portugal and Penfolds Grange from Australia.

Since July 2011, the sub-index has risen 18.2%, outperforming all other regions. California is largely responsible for leading this change – Opus One and Dominius have risen more than 30% in value since 2011.

Conditions in the Napa Valley this year predict a highly sought after harvest, with drought-stricken vines set to produce full-flavoured wine in relatively low quantities. Renowned critic Robert Parker recently awarded no fewer than 22 Northern California wines a perfect 100-point score in the first of his three-part review of the region.

For the novice collector, investing in the wines of California presents an opportunity to live a little whilst not straying too far from the sensible path. All signs point to high demand for New World wines in the near future – namely Dominius, Opus One, Scarecrow and Screaming Eagle.

 

Our extensive wine list, replete with pricing and market information for each and every brand, is available to browse immediately with the option to order directly from the website. Extra information can be requested for special item vintages, and our sales team is always available to answer any specific queries over the phone.

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