- Returns from wine often outpace art and other alternative investments, while being less volatile than stocks.
- Nick King, CEO and co-founder of fine wine investment platform Vint, told Insider why you should add it to your portfolio.
- Vint’s Head of Wine, Billy Galanko, showcased which wine regions are the best investments right now.
When crisis hits the global economy, good wine has come to the rescue of investors in the past. During the financial crisis of 2008, the leading wine investment index, the Liv-Ex 1000, actually rose as the stock market crashed.
In fact, wine returns have often outperformed art and other alternative investments, while being less volatile than the stock market and uncorrelated.
This combination of stability and profitability makes wine “the ultimate portfolio diversifier” according to Nick King, CEO and co-founder of wine investment platform Vint.
King, who has a background in the equity investing industry, said wine offers reliable long-term returns but has traditionally been difficult to access for the average investor.
“We didn’t think it was a good product experience to send someone $25,000 and you get a wine list three weeks later. We thought it was exclusive, opaque and efficient. So we spent eight months with the SEC to get qualified.”
“This allows us to maintain these fine wine and spirits collections, file the documents with the SEC, and then allow accredited and non-accredited investors to purchase shares in these collections.”
The Liv-Ex 1000 has returned nearly 24% to investors over the past 12 months, compared to 8% for the S&P 500, for example, and 5% since the start of the year, compared to an 11% decline in stocks first class. index.
King explained that each Vint collection is its own stock-issuing LLC, which is a “very efficient and reliable” investment structure that essentially allows investors to buy exposure to fine wines in the same way as acquiring stocks. shares. All of the logistical challenges and costs associated with acquiring and storing bottles are taken out of the equation by the model.
“From an efficiency perspective, similar to stocks, people want to be diversified in the spirits industry and they also want to participate in the high end of this industry. So with that fractional nature, you can to obtain.”
“Wine can be that stabilizer in your wallet,” King continued. “But he also has this long track record of 8.5% annual returns over the last 121 years. I kind of look at him through the prism of modern portfolio theory. It’s not going to hurt your returns, and that will actually help your risk adjusted returns.”
When it comes to wines to invest in once you’ve decided to allocate money, there are definitely particular regions and vintages that investors should focus on.
Vint’s head of wine, Billy Galanko, says the first thing you need to do is make sure you have a good proportion of “blue chips” in your portfolio – the most popular and popular fine wine categories. established. These are the famous European wine regions such as Bordeaux and Burgundy.
“You want to have some of those that have momentum and then keep an eye out for some of the really emerging stuff as well, like areas in South America and here in the US as well. I think it’s important to ‘having this diverse side, not just regions, but also vintages,’” Galanko said.
Galanko said smart wine investors will keep an eye out for emerging trends or crazes, and try to capitalize on them early on.
“An example is the enthusiasm for Bordeaux carried by the Asian market in the early or late 2000s, early 2010s. They started to accumulate money in 2009, one would have thought that Bordeaux couldn’t go up any more but it kept going up in 2010 and 2011.”
“Right now we’re seeing Champagne had an amazing year last year and then Burgundy as well. Those are the ones people are really getting into right now.
He added that when people have piled on top wines, investors can do well by buying “second wines” from top producers. “These get a lead, and they kind of have that effective halo all over their area.”
“We saw Napa Valley have an amazing year last year and I don’t know if it’s just because of the collection and cult status of a lot of these wines,” Galenko added. “They’re just really being introduced in the UK and Europe on a larger scale.”
“So I would say focus on those right now, and we still have our fingers in wine from Spain and the Rhone Valley, which I think has a bit more trail to also browse.”