Building a wine portfolio? Don't just invest in the classiest French vintages
2012-05-31

Building awine portfolio? Don't just invest in the classiest French vintages, report warns

By Damien Gayle

PUBLISHED:08:40, 31 May 2012 | UPDATED:15:13, 31 May 2012

When it comes to finewines, French vintages from expensive and well-established vineyards commonly regarded as the bestinvestment.

But investors should consider diversifying their portfolio across Italian, Australian and even Portuguesewines to avoid 'putting their eggs in one basket', a new study warns.

The valueof a portfolio consisting solelyof Burgundy and Bordeaux can be destroyed by a single yearof bad weather.

Goodinvestment? A new study suggests investors in finewines are betteroff spreading their portfolios across vintages from several countries

Spreading the risk across a varietyof countries - as investors in other areas do - can help mitigate the risk by protecting against the market's unpredictability.

The global finewine investment market, valued at around £2.6billion a year, is currently dominated by Frenchwines.

 Built around oneof the most ancient global commodity markets, pricesof finewines have soared in recent years due to the fast-growing demand from Asian and Far Eastern markets.

But prices can fluctuate, and depend on a numberof factors including weather, reputation, yearof vintage, stock availability, and the wider economic situation.

Researchers from the Universityof East Anglia traced nine indices that track the priceof the most sought after finewines – such as the FineWine 100 Index, the Rhone 50 Index, the Australia 20 Index and the Port 10 Index – over 10 years from 2001.

Valuable: Burgundy red La Tache Grand Cru 1996, which changes hands at about £1,500 a bottle

The study, published in the International Reviewof Financial Analysis, also looked at figures from the London International Vintners Exchange (Liv-ex), which holds the most comprehensive price data on almost 100,000 finewines.

The report's authors found that finewine was generally less volatile than otherinvestments, but that when falls in value did occur they tended to be clustered geographically.

This meant that if one Frenchwine lost value, so did mostof the others. Italian, Australian and Portuguesewines were least likely to follow the same trends as Frenchwines, the study found.

Lead author Dr Apostolos Kourtis from UEA's Norwich Business School said: 'Theinvestment market deals mostly with Frenchwines, but we found that diversification across the different varietiesof Frenchwine is not that effective.

'However, our results suggest that diversification across otherwine-producing countries is likely to be much more efficient in reducing overallinvestment portfolio risk.

'This is probably due to the fact that finewine prices are sensitive to climate variations at a geographical level.

'As with all commodities, the finewine market has great potential for producers and investors alike. The continuing successof this market will depend on the ability to monitor and manage price risk in a transparent manner

Read more: http://www.dailymail.co.uk/news/article-2152544/Building-wine-portfolio-Dont-just-invest-classiest-French-vintages-report-warns.html#ixzz24wwZFtmV