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Cru Wine Investment, a London-based fine wine investment firm, has recently conducted research showing the benefits of mixing a wine investment portfolio with other equities, bonds, real estate and commodities.

Fine wine’s correlation with equities is low on both an annual and monthly level, according to Cru’s research using Liv-Ex figures.

“This proves to be one of the key financial attributes of fine wine: it’s very low correlation with equities albeit its high historical returns of 9% per annum”, the company said in a statement.

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Over the near-decade since 2005 en primeur prices were released, the biggest price leap has been seen by the second wines of Médoc first growths, especially Carruades de Lafite, which has made early investors a 469% return.

Noting the “brand spill-over effect” driving this performance, CWI managing director Gregory Swartberg told the drinks business: “a buyer is essentially acquiring a wine from a famous châteaux but for a large discount.” As a result, he remarked: “The demand for these wines is still high in Asia. As long as these châteaux price their second wines right, the demand will be around the same level.”

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Mouthon Rothschild

Fine wine investment is next to its strong historical return also a great diversification product.
When looking at a 10-year historical data-set, fine wine correlation with other securities is low, particularly with equities which makes its diversification characteristics attractive.Fine wine has long been promoted as a good hedge vs. other financial securities but little quantitative data is available to support this.

On a 10-year historical data-set of equities, real Estate, bonds and commodities, a correlation analysis has been conducted on both a monthly and annual level. The Liv-100, the leading wine index, was used as the fine wine benchmark.

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Gregory Swartberg, Managing Director of Cru Wine Investment, tells us that fine wine investment, like art, rare coins, stamps and classic cars, is a great alternative – and tangible – investment besides the more traditional ones in stocks, bonds, cash or real estate.

“It has proved very interesting, with an average annual 11% return on investment over the last 10 years”, Swartberg notes. “It’s outperforming most major indices, including both the FTSE 100 and Dow Jones, among others”.

The usual way to get involved is to approach a fine wine investment house who will help you put together and buy a portfolio that best matches your investment profile (based on risk, investment horizon and investment size). It’s a pretty clever move, financially-speaking: “During the investment period, the cases are typically kept-in-bond, which means that no VAT has to be paid while stored under these conditions, and it also optimises the value of the cases by keeping them under perfect conditions (something called ‘en provenance’ in the world of fine wine),” Swartberg explains. So, there’s no need to worry what to do with all those cases when you have decided you want to splash out…

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