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Published: 22 June 2008

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Published: 20 May 2008

A haven for investors in difficult times.

Published: 21 December 2007

Fine wines beat stock market with 39% gains

By Nikhil Kumar

Fine wine has beaten the FTSE 100 this year in investment terms as the value of bottles from Bordeaux clocked up gains of more than 90 per cent in the past 12 months.

The index of the top 100 wines on the London international vintners exchange, an electronic market for fine wine, has gained 39 per cent between January and Dec-ember, outperforming the FTSE 100, which has risen by 3.4 per cent, and gold, which has seen its value swell by 23 per cent since the start of the year.

Barrels of oil, which were almost 47 per cent more expensive this month than in January, rolled up just ahead of the vintages, while the S&P 500, which has gained only 4.4 per cent, and the Nikkei index, which has lost 9 per cent, fell by the wayside in the list of the year's best investments.

Cases of 2000 Lafite Rothschild, from the venerable Château Lafite Rothschild in the north-western Médoc region of Bordeaux, sat at the top of the pile – sets of 12 bottles, which cost £4,775 last year, sold for £9,100 last month. Owners of the 2003 or the 1982 vintage need not lose heart, as their investments rose in value by more than 76 per cent in the past 12 months. The 1986, 1996 and 1998 vintages made up the rest of the Château Lafite squad in the list of the top 10 wines by performance.

Beyond the Rothschild stable, bottles of 2003 Montrose, which cost less than £1,000 last year, added almost 64 per cent, selling for £1,540 in November, while bottles of 2003 Margaux, also from Bordeaux, cost £5,225 last month compared with £3,325 in December 2006.

James Miles, a director of the exchange, said that rising demand from Russia, China and India, where newly minted investors are turning to the rarest vintages to whet their appetite for luxury, kept the market busy. "Wine is more posh than whisky or vodka," he said, "A good vintage is a very important part of a rich man's portfolio. And the number of rich people is growing at the same time as some of the biggest vineyards cut production, pushing prices up for the rarest bottles." He added: "Fine wine is also limited by nat-ure, so when there is an increase in demand the prices rise fast. People drink wine, so it's not like a painting, which will always be available. You can see inflation immediately, without having to wait for years."

Mr Miles said that the 2005 vintage would be the "biggest theme for 2008".

Master sommelier Gérard Basset, the owner of Hotel Terravina in the New Forest, noted: "It's not an easy investment. You really need to know your vintages, and very few people do know them that well. You also have to be fast – get the wine as soon as possible, before buying and selling in the markets makes it too expensive."

He added: "It's also a bit of a gamble sometimes, unless you stick to the ones that always do well, like some wines from Bordeaux, Burgundy and California. But you could diversify and try some of the new wines from Spain and Italy."

January 01 2008

We’ll drink to that: wines can earn you small fortune

by ALAN MACDERMID

CommentInvestors with a nose for a good buy are toasting their fortunes after proving that a good wine can go up as well as down.

Auction house figures have shown a year of soaring profits for buyers who know their plonk from their Pomerol and can put their money where their mouths are.

In some cases, the money made on cases of upmarket claret have more than trebled in the last three years, comfortably outstripping average increases in property prices of around 20% in the same period.

This compares with house price inflation, which has slowed to an estimated 6.9% during 2007 and is predicted to be just 1.8 to 2.0% in 2008.

Like any investment, wine comes with risks attached - apart from the temptation to liquidate your assets over a good meal, you have to be savvy enough to pick the right vintage in the first place.

For example, a case of 1996 Chateau Pichon Longueville bought for £414 in 2005 lost money in the first 12 months and recovered in 2007, but only to £483 a case - a mere 15% return.

Yet a case of another red Bordeaux, the 1995 Chateau Leoville Barton, cost less, £368 a case, in 2005 but has just been sold at auction for more, £529, making it well worth going into the red for at 44% profit.

Going more upmarket in the first place can make the biggest profits of all if the choice is right, say wine experts.

A case of Petrus, the expensive wine popular in Gordon Ramsay and other Michelin-starred restaurants - and the name on some legendary trophy lunch bills - would have cost around £13,800 in 2005 for a case of the 1982 vintage.

That may seem a lot for 12 bottles of claret but a year later it was already worth £25,400 a case and by the end of this year even Ramsay would have been lost for words when a case was sold at auction for £43,700.

Damian Tillson, deputy director at Sotheby's, said: "As far as potential investment is concerned, the best advice is usually to go for the very best wines from the very best years.

"First growths from 1982, 1990, 1996 and 2000 have all shown good returns over the last few years.

"Moreover, the added advantage for investors is that wine is currently classified as a wasting asset' and therefore is not subject to capital gains tax."

A wasting asset means it is not seen as lasting forever. Although prices of the finest claret - wine from the Bordeaux region of France - have done spectacularly, not every region has done as well and there are plenty of risks.

Some other wines have seen prices plummet because they do not mature as well as predicted in the first place.

From The Sunday Times December 16, 2007

The best places to invest a bonus

We asked where City high-flyers were investing their rewards, so you can profit, too Clare Francis THE City bonus season is upon us again, and while the Centre for Economics and Business Research believes the total handed out will be 16% lower this year at £7.4 billion, top staff are still expected to pocket seven-figure sums.

Goldman Sachs, the US investment bank, kicked things off last week when it announced its employees around the world would share a bonus pool of $18 billion (£8.8 billion), giving staff an average of about £300,000.

Last year, bankers invested the bulk of their money in property. Savills, an estate agency, estimated that about £5.5 billion of 2006’s £8.8 billion UK bonus round went into bricks and mortar. But with concerns that house prices may fall next year, they are expected to look elsewhere for a home for their money.

Raymond Sykes at Butterfield Private Bank said: “Given the current uncertainties, we are seeing a high number of clients holding cash as they wait for the outlook in the equity markets to become clearer.”

Fine wine

Fine wine prices have slipped 3% over the past three months, according to the Livex 100 index, as stock-market uncertainty has also unnerved wine investors - although prices are still up 42% over the past year.

Julian Lamden at Coutts, a private bank, said: “When times are tough, people cut back on luxuries like wine.”

However, Simon Staples at Berry Brothers & Rudd, a wine merchant, thinks it is still a good time to invest if you pick the right vintages and he believes fine wines will remain a popular choice for City workers. He said: “It’s a very clever place to put your money. The luxury wines are going to Russia and China – demand is still very strong and is unlikely to be affected by an economic downturn. Supply of the best wines is tight because only a certain amount has been produced.”

He rates the years 2005, 2003, 2000 and 1996 for bordeaux.

A case of 1982 Lafite Rothschild would set you back about £22,000, but you could get a case of the 2005 vintage for £7,200 and Staples believes its value could rise to around £20,000 within five years or so.

He also tips Château Margaux 2005 and said it is the best red wine he has ever tasted. That would also cost about £7,200 a case.

While white is not normally the best wine for investment, a case of 2001 Château d’Yquem would cost around £4,000 now but could be worth between £20,000 and £30,000 in 10 years’ time.

Next year could also be a good time to buy champagne as the 2000 vintage will be released for sale in 2008, but stick with the leading names: Dom Pérignon, Krug and Salon.

Gains from fine wine are not normally liable for capital-gains tax (CGT), and you can also buy it free from tax and duty as long as you keep it in a bonded warehouse. Berry Brothers & Rudd charges £9 a year per case for storage, including insurance.

From The Times December 29, 2007

The best investments for 2008

Russia, wine and cash look the best bets for the coming yearMark Atherton As we say farewell to 2007, still reeling from the Northern Rock crisis, a crackdown by mortgage lenders and the first signs of falling house prices, one thing looks certain: it is going to be hard work making money in 2008. Justin Urquhart Stewart, of Seven Investment Management, the wealth manager, says: “There is an economic slowdown on the way and the US could be right on the brink of recession. The first half of the year looks like being particularly tough as the continuing problems in the US residential property market continue to reverberate round the globe.”

Both he and Mike Lenhoff, of Brewin Dolphin, the stockbroker, expect the Bank of England to continue to cut interest rates in an effort to revive the economy. Mr Urquhart Stewart expects the Bank to implement two rate cuts this year, while Mr Lenhoff is looking for three to take the base rate to 4.75 per cent by the end of next year.

Mr Lenhoff says: “The cuts will start off as damage limitation, but they should be enough to stimulate a pickup by 2009. The hope is that by the middle of next year the markets will start to look forward to better times in the following year.”

His year-end target for the FTSE 100 index of leading shares is 7,200 while Mr Urquhart Stewart goes for a figure of 6,800.

In these tougher times the key to success will be identifying sectors that can ride out market storms thanks to low levels of borrowing and their ability to generate cash and pay out dividends. Traditionally, these have included utilities, tobacco and telecoms, but Henk Potts, of Barclays Wealth, the wealth management arm of the high street bank, is less keen on utilities, pointing out that they are already near record highs and that they could face a tougher regulatory regime in the future.

Mr Potts favours mining stocks, because of continued strong demand for raw materials, and banks, where he thinks that most of the bad news is already in the share price. He expects the UK stock market to rise by about 6 per cent to 7 per cent over the next 12 months, indicating a figure for the FTSE 100 of about 6,700 by the end of next year.

Given the modest prospects for share growth next year, some private investors may be tempted to opt for alternatives such as bonds or commercial property. However, Mark Dampier, of Hargreaves Lansdown, the independent financial adviser (IFA), says that they should tread with care. “Some people believe that the commercial property sector has taken such a tumble that it is now looking quite attractive,” he says. “But I would want to see property yields, currently about 5 per cent, climb back to 6 per cent before they start to become tempting.”

Mr Dampier is also wary of the bond market, especially at the high-yield, low-quality end of the market. He concedes, however, that there is some value in the lower-yielding top-quality end of the market.

He thinks that better returns are likely to be obtained by investing in equity funds. For fairly cautious investors in these stormy times, he suggests an equity income fund or an absolute return fund. Both offer some downside protection thanks to the yield on the income fund and the ability of absolute return funds tomake money when shares are falling as well as rising.

Among overseas stock markets, Mr Dampier expects Asia to do well, though his favourite country is Russia. He says: “It is rich in commodities and natural resources, for which there is huge global demand, and share prices are still quite cheap.”

Rob Harley, of Bestinvest, another IFA, thinks that Europe looks a good choice. He says: “Consumers on the Continent are not as indebted as those in the UK and the US, and European stocks are on attractive valuations. Buying into Europe is also a way to gain exposure to emerging markets through European exporters without running the risk of buying directly into such a volatile sector.”

Those of you who think that your homes could be your best investment in 2008 may be disappointed. Property price forecasts for next year vary wildly, ranging from a rise of 10 per cent to a fall of 12 per cent. Both Nationwide and Halifax, two of Britain’s biggest lenders, forecast that house prices will remain static next year and both expect falls of 2 per cent in northern England.

Lucian Cook, of Savills, the upmarket estate agent, expects there to be a revival of the North-South divide, with London prices rising fastest – at about 5 per cent – while regions such as the North East, North West and Yorkshire struggle to register growth of even 0.5 per cent.

If you do not want to take a bet on shares or property you could simply put your money in a savings account, where it will earn as much as 6 per cent risk-free. Sue Hannums, of AWD Chase de Vere, the IFA, says: “Anyone who is nervous in these turbulent times can always fall back on cash as a tried and trusted standby.”

Those who are tempted to seek refuge from the gloomy forecasts by drowning their sorrows in drink may have inadvertently hit upon one of the best prospects for making money next year. Simon Staples, of Berry Bros & Rudd, the wine merchant, says that demand at the top end of the market remains extremely strong.

He says: “Wines from the top ten châteaux of Bordeaux are still proving very popular with buyers from Russia, China and Korea. They particularly favour Château Lafite Rothschild. A case of the outstanding 2005 vintage now sells for about £7,500 – and that price is likely to rise with time. “

Buyers are also very keen on Lafite’s second growth: Carraudes de Lafite Rothschild. This ranks just below Château Lafite Rothschild in quality but the price of the wine has been rocketing. Two years ago it would have cost about £20 a bottle, but now you will not find one for less than £100 a bottle.”

Dec. 20 (Bloomberg) 2007

Christie's Wine Sales Rise 22% This Year; Sotheby's Climb 32%

By Guy Collins

Global wine sales by Christie's International rose 22 percent to a record $71.65 million this year, as demand remained strong for top Bordeaux, Burgundy and Rhone vintages.

Christie's European sales fetched a total $44.43 million and its U.S. auctions raised $27.22 million, the auction house said in an e-mailed statement yesterday. Sotheby's reported on Dec. 13 a 32 percent increase in its sales to $49.29 million.

The higher volumes at auction mirrored price increases for investment wines, driven by demand from wealthy collectors in newer markets such as Russia and China, as well as the U.S. and Europe. The London-based Liv-ex 100 fine-wine index has risen 39 percent since the start of this year, with prices surging in the first seven months before flattening out and slipping back.

Demand ``was pretty sustained throughout, particularly at the top level,'' said Serena Sutcliffe, head of Sotheby's international wine department.

The top lot of the year sold by Sotheby's was a jeroboam of 1945 Chateau Mouton Rothschild, equivalent in volume to six 75- centiliter bottles, which sold for $310,700 in a New York auction.

The most expensive case sold at Christie's was a 1961 Hermitage, La Chapelle that sold in London in September for 123,750 pounds ($245,330), a world auction record for a Rhone and for any wine case sold in Europe.

Christie's held 39 sales during the year in the U.S. and Europe, including record sales in Geneva, Amsterdam and Los Angeles, as well as an auction at the Hospices de Beaune in Burgundy.

The top case auctioned at Sotheby's was a 1990 Romanee-Conti, which fetched $262,900 in New York.

To contact the reporter on this story: Guy Collins in London at guycollins@bloomberg.net

The Finishing wines , Drinks Business 28/11/07
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2005 Alive, Drinks Business 17/12/07
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You Tube : Justin Gibbs from Liv-ex 06/12/07
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