Richard Brierley is Head of Fine Wine at Vanquish Wine Ltd, where he runs a bespoke and discreet service to private clients in the global market for fine and rare wines and is the fund manager of Magenta Wine Investors, a privately held investment vehicle for fine and rare wines.

Whether investing financially or for future enjoyment, fine wine does not have to be challenging with the right advice and a little patience.

The growth of wine investment, as an alternative to more conventional forms of portfolio has continued to rise in recent years and has spurned the growth of several Wine Investment Funds and a wide variety of resources for the wine investor. With sound advice and a broad investment strategy, the results can be rewarding both financially and on the palate!

So, can one still make a sound wine investment in this market?

Yes! The current economic climate does not preclude a sound alternative investment in fine and rare wines, indeed like many markets there many opportunities to buy into the ’blue chip‘ now at a discount to the heights of the market in 2007.
Whilst technology has made comparative price information available to any collector seeking to acquire investment grade wines; the research behind the price is a key factor that will protect your portfolio long term. Expert guidance allows a potential investor to make careful acquisitions by understanding the drivers of market value such as critical opinion, provenance, storage conditions and the presence of the original wooden case for the best wines.

A balanced portfolio across regions, producers and maturity, like most investment strategies, is the soundest approach. An authoritative advisor can help sort through the hype and conduct a thorough market analysis of the future price curve of an agreed basket of wines to measure potential returns.

Whilst in some instances the market for a single wine or vintage increases rapidly on an influential critic’s ‘buy’ recommendation; it is preferable to consider a wine investment as a 5-10 year investment. Past trends show us that wines often peak in value as they approach their first maturity window; when they begin to lose their youthful fruit and develop as mature wines, this for most great wines is at least 5-10 years from bottling.

The influence of the Asian market has grown exponentially in recent months, lead by the buying power of greater China’s HNWIs and the abolition of duty on wines in Hong Kong, SAR. Hong Kong has become the new hub of a growing shift of wine investment and consumption in the world’s most populous continent. Whilst for now, their tastes are limited to a few top château (in particular Château Lafite) a maturing market in mainland China will lead to a broadening of this influence.

The active secondary market in fine and rare wines, together with key indices provided by (amongst others) Liv-ex; a real-time wine trading platform for wine companies, allow investors to track the market value of their portfolio on a monthly basis. The Liv-ex Fine Wine 100 Index is the industry’s leading benchmark. It represents the price movement of 100 of the most sought-after fine wines for which there is a strong secondary market and is calculated monthly. The value of the index as of 30th of September 2010 was 308.21, up 1.53% on the previous month. The index is up 32.8% year-on-year and 28.8% year-to-date. Accurate information and candid advice on a timely basis should lead to a successful sale.

At the time of sale, there are a number of routes to market that may be considered. It may be that your chosen merchant can quickly and efficiently find buyers for your portfolio or it may be that a major auction sale would increase the pool of buyers thus increasing the price. An ideal consultant would be able to understand and assess both these options and advise accordingly for all or part of the portfolio.

What’s current?

The recent release of the 2009 Bordeaux vintage to the market at record prices reflected a stunning vintage and rising interest from China. There was, however, some resistance to the pricing of some châteaux’s wines (that will not be delivered until 2012) but there are great buys to be had amongst the crazy prices. This strong pricing of unfinished wine presents an opportunity for the canny investor and my advice now is to buy into the vintages of 2006, 2005, 2000 and 1996 as they represent great value for money compared to the 2009 that is still in the barrel.

In terms of future drinking pleasure, the modern wines, it is argued, will not last as long as their 1960s counterparts. Nonetheless, the best wines from the best vintages of the past generation will prove to be delicious at 10, 15 or 20 years of age. The young wines of Bordeaux that are full of vibrant fruit become mellow with age, taking on the aromas of cooked fruits, tobacco and dried spice. A mature wine at the peak of its drinking pleasure can be a truly sensuous experience. Investing now (and a little patience) will guarantee that these wines are not out of one’s reach at the right time.

Of all alternative investments, wine investment just might be the most fun! Whilst financial gain maybe the initial goal, the fringe benefits may be just as appealing. Many investors choose to take their dividend in liquid form! - by keeping back a few of those precious cases for enjoyment with family and friends.
If you are bitten by the wine ‘bug’ then seek good advice, trust your own taste and above all share!