There are many benefits of investing in fine wine, it is truly an investment like no other:
Supply & Demand
Wine is a tangible asset; supply and demand are a significant driver of price. The top wine producers produce a finite quantity in each vintage and with increasing consumption, this creates long-term scarcity and growth potential. Our scale and relationships provide privileged access to fine wines. In fact, last year we were the second largest buyer of en primeur Bordeaux in the world.
Fine wine has historically had low correlations to equities and therefore provides diversification within traditional portfolios.
Fine wine returns become more consistent and less volatile the longer it is held. This occurs as a result of the fundamental principles that drive fine wine prices – a demand/supply imbalance. Fine wine has a perfectly inverse supply curve which is exacerbated over time as the available wine is consumed and diminished. Over the last five years ending February 28, 2021, the Liv-ex 1000 index had bond-like volatility (as measured by annual standard deviation) at 3.9%, versus gold at 14.1% and the S&P 500 at 14.9%.
Low Downside Capture
Historically, fine wine has provided strong downside protection. It did not decline nearly as much as equities in the 2008 global financial crisis when the S&P 500 declined 38.5% and the Liv-ex 1000 declined by only 0.6% (Dec 31, 2007 – Dec 31, 2008). During the start of the COVID pandemic, the S&P 500 declined more than 23% and the Liv-ex 1000 was only off by 4% ( January 1, 2020 – March 21, 2020). Source: S&P Global Market Intelligence.
Cult Wines provides segregated and individually managed portfolios to clients. CW Index represents the aggregated performance of those client portfolios over the period covered based on unaudited figures. Index information is included for illustrative purposes only: each individual portfolio might have performed differently. In order to calculate CW Index performance, Cult Wines rebase each wine held in clients’ accounts (reflecting all wines under management) from the date they are placed in the account by assigning them an index number of 100 reflecting entry price in the portfolio and calculates the return to date on the appreciation (or depreciation) of that wine from 100. The index performance is an aggregation of all wines held by Cult Wines clients, and their returns. Cult Wines uses the midpoint of the quoted price on the independent exchange Liv-ex in its calculations and in rare instances where a quote is not available, Cult Wines will fair value the wine using prices from Wine Searcher and other independent sources. Your actual portfolio return will vary from the CW Index performance based on your stated objectives, portfolio composition, fees and will be available for you to see daily in your account as prices are updated from the Liv-ex on a daily basis, or in the rare circumstances mentioned above, at the Cult Wines fair value. Past performance is not necessarily indicative of future results. Returns are calculated in CAD unless otherwise noted.
Investing with Cult Wines
This essential brochure will take you through our investment process, fine wine investment merits, provenance and portfolio creation.